Avoid These Common First-Time Home Buyer Mistakes

Avoid These Common First-Time Home Buyer Mistakes

Buying a home for the first time can be intimidating, especially if you don’t know what to expect throughout the process. However, as with all things, it’s essential to perform as much research as possible to learn and understand how home buying works. It’s easy to make mistakes, but it’s even easier to avoid them with the right information and preparation (and the right agent by your side!).

Below are nine common mistakes to avoid, as well as advice for first-time home buyers.

1. Spending Beyond Your Budget

Never, under any circumstances, spend over your budget when buying a house. There are several up-front, out-of-pocket payments that must be made during a transaction, and you don’t want to completely deplete your savings to pay for them. Keep in mind that, once in the home, you may need money for repairs, upgrades, or other renovations on the home—not to mention, you still need to account for your everyday expenses and monthly utilities.

Budget wisely, and stick to the plan. Getting pre-approved through a mortgage lender should always be the first step.

2. Conflating Pre-Approval with Pre-Qualification

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Pre-qualification is when a lender estimates what you can reasonably afford for a home, based on a quick glimpse at your financial history. Pre-approval, however, goes beyond that. The pre-approval process involves the lender verifying your credit score and determining the loan amount for which you’re eligible. In other words, a pre-approval letter confirms your readiness as a home buyer and is preferred, if not required, by sellers across the board. The time frame for getting pre-approved will vary by lender, so establishing a lender relationship early on is key. Your Realtor can assist you in finding a lender, who will be your trusted advocate and a working partner with your Realtor throughout the home selection and the transaction process.

3. Not Accounting for Upfront Costs

There are various upfront costs of which you should be aware. The down payment is by far the most important one, since it will affect your monthly payments and annual interest rate. The higher percentage you put down as your down payment, the lower your monthly payment, but first-time home buyers shouldn’t jump to making large down payments. Take your budget into consideration, and be mindful of your other expenses.

Other upfront costs are closing costs, title fees, and a “courtesy deposit,” known as earnest money, which is a deposit to solidify your intent to a seller. All of these costs are paid during the transaction and will come directly out of your pocket, so you want to make sure you budget for them.

4. Forgoing the Home Inspection

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While a house might look like it’s in pristine condition at a glance, that may not actually be the case. Hiring a professional home inspector to give you their best-informed opinion on a property’s interior, exterior, and infrastructure after conducting a thorough assessment is incredibly important, even with new construction. Don’t skip the home inspection. List an inspection as part of your list of contingencies, and make sure to review the report with your real estate agent. Hiring the home inspector is a buyer’s expense, so budget for this item as well. Also, keep in mind that there are various other inspections that may need to be done depending on the property (radon test, oil tank search, sewer scope or septic tank pumping and inspection, just to name a few). Depending on what an inspection reveals and depending on the state of the market, you may be able to negotiate repairs or a credit for repairs. Your trusted Realtor will help you navigate inspections and inspection negotiations.

5. Underestimating Additional Expenses and Costs

Always save more money than you think you will need. Additional expenses include closing and processing fees, property taxes, homeowners insurance, mortgage insurance, maintenance, repairs, upgrades, and utilities. Your real estate agent can help you understand and estimate these costs, but it’s always best to overestimate how much you think you will need.

In general, save about three to six months’ worth of living expenses. Do not deplete your savings, especially if you’re buying a home for the first time.

6. Miscalculating Repair Costs

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After performing a thorough house inspection, an inspector will provide you with a full report, including areas that need repairs, maintenance, and/or infrastructure systems like heating and air conditioning in need of upgrades or total replacement. A home inspector may provide you with general cost estimates, but is more likely to refer you to an expert to get accurate bids. You should always take the initiative to properly calculate any and all repair costs. Get in touch with local contractors, ask for quotes, and factor these expenses into your budget.

If repairs turn out to be too costly and out of your estimated budget, then the home may not be the right one for you. This is why you should always schedule a home inspection. You don’t want to buy a house, only to discover after you move in that it’s in dire need of repairs and renovations that you may not be able to afford.

7. Overlooking Credit Score Reports

Your credit score is a huge factor in determining not only your loan eligibility, but also your mortgage rate. During the pre-approval process, a mortgage lender will assess your financial history and run a verification of your credit score. Should your credit score end up lower than desired, you’ll want to sit down and review the report for errors or inconsistencies. Even the most marginal increase in your score will prove beneficial to you and your finances, not just your mortgage. Be sure to get a list of things to do and NOT do while going through the home purchase process. Things like applying for a credit card or purchasing a new car are always things you should run by your lender before pursuing during the home buying process.

8. Not Comparing Mortgage Rates

The first mortgage lender you find shouldn’t necessarily be the one you default to. Ask various lenders about their loan programs and mortgage rates, and compare them to find the best rates. It is also important to make sure you are comparing apples to apples, so to speak. There are various other financial aspects to a loan package to consider. Also important to factor in is customer service and professionalism; a lender who is committed to providing the best customer service is a good lender to work with.

9. Searching for a Home Before Choosing a Mortgage

While searching for a home is the most exciting part of the home-buying process, it should never be the first step. Receiving a pre-approval letter and coming up with a financial plan should always come first, no matter what. Pre-approval will determine your loan eligibility, and securing a mortgage will smooth out the rest of the process. Besides, most sellers want to know you are pre-approved before accepting an offer.

Your dream home will wait for you. Get pre-approved first, and don’t let emotion sway you!

It’s strongly recommended that every first-time home buyer recruit the aid of a reputable Hood River Realtor. For the best of the best, consider reaching out to Julie Gilbert, an expert in Hood River real estate. She is committed to providing exceptional service to her clients while using her extensive knowledge and experience to negotiate the best deals on their dream homes. Contact her today!

*Header photo courtesy of Shutterstock

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Julie believes in the relationships developed as Realtors, and knows that a successful transaction starts with understanding her client's interests and needs. She looks forward to hearing from you.

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