We’ve already given you a list of 10 must follow rules for first time home buys and a list of 10 questions you should ask yourself before you buy your first home but we haven’t really talked about what you shouldn’t do before you buy your first home. These 10 common mistakes first time home buyers make are all easily avoidable if you’re willing to put a little time into your home search. You may feel like you’re in a hurry, especially if there is a major life change coming like the birth of a child or a wedding, but it is important to take these 10 common mistakes to heart so you can avoid making them yourself.
10. Not finding the right real estate agent.
Every first time home buyer should work with a real estate agent but you really need to find the right agent for you. You want to choose someone you can trust and feel comfortable talking to. You need to be able to voice concerns to them and most importantly, you need to be sure they understand your wants and needs but also that they understand you are a first time buyer and patience may be required. There are different kinds of real estate agents; duel agents, buyer’s agents and seller’s agents. You’re going to want to look for a buyer’s agent. While they will still have their own interests in mind, they’ll have your interests in mind as well.
09. Following a real estate agents advice without thinking.
A good real estate agent can be the first time home buyer’s best friend but you need to think for yourself as well. Don’t mindlessly listen to everything your agent says. Take their advice and listen to what they have to say but also listen to what your head is telling you as well. Something that may not seem like a big deal to a real estate agent may be a big deal to you. You know yourself better than your agent could ever know you. Your agent is important. They know more about the housing market, current trends and can help you negotiate a fair deal but you know your wants and needs. Work together to find the right option.
08. Not taking resale value into account.
You’re just buying your first house. Why even think about selling? Simple. It’s always a good idea to plan ahead for your future, especially when you’re making a decision as life changing as buying a home. Families change over time. There may be new additions and you may decide to move into a bigger home. Children grow up and move away which may leave you with more room than you need so you may want to look for a smaller home. You may get a job in another city or state and be forced to move. A lot can happen. If you consider the resale value of your home as you’re buying it, you’ll be saving yourself a major potential headache down the road if you decide to sell.
07. Failing to get pre-approved for a home loan.
To put it simply, finding a house you want to buy and then getting a home loan is like putting the horse before the cart. It just doesn’t make sense but a lot of people do it. There are many sellers out there who will not consider your offer unless you have a letter from a financial institution stating you have been pre-approved for a loan which means you could find the house of your dreams only to lose it for lack of one piece of paper. Start applying for a home loan before you even start looking for a house. This not only ensures you’re able to get a loan but also lets you know how much you have to spend to get the home you want. It may be more or less than you expect.
06. Skipping the credit check before applying for a loan.
Most of us don’t know what our credit score is and that can get you into real trouble if you’re planning to buy a home. If you have a decent credit score, you can often avoid steep interest rates on the loan you get for buying your home. The thing about your credit report is that there’s a very good chance it is incorrect. Check over your report for any inaccuracies and get them straightened out immediately. That’s not always easy to do, but the sooner you start, the better off you’ll be. If you can correct any errors on your credit report, your credit score will improve and you’ll have an easier time getting a loan for your home with a decent interest rate.
05. Trusting verbal agreements.
Verbal agreements between two honest adults can work. Let’s not pretend they can’t. The problem is that it can be really hard to tell if the person you’re making the agreement with is honest or not. They might promise you something, shake on it with you, only to later tell you that no such agreement was made. Without evidence of the agreement, you will find yourself with little recourse. If you want something and the seller agrees to give it to you, make sure you get it in writing. That couldn’t be more important.
04. Foregoing the home inspection.
This one is surprisingly common but such an incredibly bad idea. The home inspection is important and it is important the person you hire to inspect your home knows what they’re doing. In a perfect world, all of the potential issues with the home would be disclosed by the homeowner but this isn’t a perfect world and in all honesty, not all of the issues with the home will be known to the homeowner at the time of the sale. Make sure you get someone in your house to look it over that knows what they’re doing before you close on the house. If there are any major repairs, you may be able to get the homeowner to cover them or knock the estimate for the repairs off your purchase price.
03. Not anticipating all the costs associated with buying a house,
When you buy a house, there are a lot of fees involved and those fees can add up pretty quickly. Some of the fees you may have to cover include:
- An appraisal fee
- A credit report fee
- Property taxes
- Homeowners insurance fees
- A notary fee
- A loan application fee
- An escrow fee
- An inspection fee
- Moving costs
There are credits you can get to cover some of these fees and you will not all of these fees will apply depending on the lender you work with, the agreement you work out with the homeowner or the state you live in. Talk to your real estate agent or a real estate lawyer about what fees you may be responsible for and make sure you budget accordingly.
02. Buying in unfavorable market conditions.
The housing market can be a little bit complicated. Making matters even more complicated is the fact that the housing market is also constantly changing. It’s better for you as a buyer to look at houses when the market favors buyers. It all comes down to supply and demand. If there aren’t many houses up for sale but a lot of people looking for houses, the housing market is going to favor sellers. They’ll be able to sell their property at a higher price than they would in a buyer’s market. You really want to try to hold off until there are more houses for sale and less people are buying. This is called a buyer’s market. You’ll get a better price on your house because more less people looking at more available houses means sellers have to make their home as appealing as possible in order for it to sell. This often means doing upgrades to the home and lowering the price, making it the ideal time for you to buy. Do a little research into the market in your area. If you aren’t sure what to do with the information you find, talk to a reputable real estate agent to help you make sense of the information you have.
01. Spending beyond your means.
Buying a home is not like renting. You will have a monthly payment to make like you would if you were renting but you also have new expenses to worry about. Maintenance and repairs are your responsibility when you own your home. Figure out your monthly expenses making sure to include everything you spend money on over the course of a month. Include hair cuts, entertainment expenses, take out food, gas to and from work, bills and groceries. Go with a high estimate. In other words, what is the most you would spend on each item on the above list. Now, figure in your monthly mortgage payment. Have that figure? Determine whether you’re going to be spending more each month getting to and from work. Maybe you’ll have a longer commute. That longer commute means a more expensive drive to work. When you’re all done with that, is there enough left over to take care of any repairs you may need to make from month to month and enough to put away a little something for your future. Costly repairs to a home are not uncommon. The roof may leak. An appliance could break. These are all very realistic expenses a home owner may have to plan for. Create your budget before you start looking for a house so you know exactly what you can or cannot afford.