Buying a home can be tremendously exciting, especially if you’re doing so for the first time. It’s easy to become blinded by hardwood floors, fenced-in backyards, and beautiful backsplashes, though, and it’s easy to rationalize a larger purchase than you were originally interested in spending. In fact, there are a number of common mistakes that first-time home buyers make that should be avoided at all costs. Here are a few:
Overspending
Before looking at properties, you’ll want to first know what you can afford. Using an online tool can be a helpful place to start, though you might end up needing to make adjustments based on your individual situation. Once you’ve done the legwork, meet with a lender and get pre-approved for an amount you can afford. You’re better served leaning towards a lower amount than a higher amount, and remember that you don’t need to use the entire amount you’re pre-approved for.
Counting Chickens That Haven’t Hatched
It can be tempting to base your mortgage on how much you think you’ll be earning in 6 months, a year, or five years. With that said, one of the worst mistakes you could make as a buyer would be in estimating your mortgage on anything other than what you’re currently making. This is a good rule of thumb whether you’re in your last year of law school, or you’re expecting a raise in the near future, or anything else along those lines. While you might be in a better financial situation a year down the road, there’s never a guarantee, so err on the side of caution.
Failing to Account for Costs
When renting an apartment, you’ll generally have one payment to make, that being the rent. When buying a home, your mortgage payment is just the beginning, Homeowner’s association fees, insurance, property taxes, and maintenance all play a role in how much you’ll really need to shell out on a monthly basis. Insurance and property taxes will vary based on your geographic location as well. Additionally, if your down payment is less than 20% of the selling price, you might end up paying an additional cost- private mortgage insurance- which is essentially insurance for the lender in case you default on your loan.
Failing to Protect Yourself
One of the most important things you can do before buying a house is conducting a home inspection. A certified inspector will be able to find problems that you can’t, and you’ll want to know these problems before you sign on. Another useful form of protection is a contingency clause, which protects you if you lose your job and the loan falls through (or, perhaps, the appraisal price comes in over the purchase price). Should one of these events occur, you’ll get back the money you used to secure the property.
Being Too Naive or Paranoid
Many first-time home buyers, due to having insufficient experience with the process, assume that nothing could possibly go wrong. They’ll look at problems in the home as easy fixes, move to a neighborhood on the wrong side of town, or are unrealistic as to the cost and time it takes to make repairs. On the other side, some buyers can be quite paranoid, believing the property’s price to be an inaccurate assessment of the house’s market value or submitting low-ball offers.
Source: USA Today