Last updated on June 14th, 2024 at 09:11 am
A home purchase can be an extensive process. There are many moving parts when you make an offer on a house.
Did you know that four out of 10 first-time homebuyers have buyer’s remorse?
While owning a home is a dream for many, the route to closing on a home can be a maze within a riddle.
From emotional overspending to neglecting hidden expenses, a litany of missteps can turn your fortuitously-ever-after into a economic nightmare.
The key is although you probably will be overwhelmed, you don’t want to make any big mistakes.
A seasoned realtor who has your best intentions can prevent you from any large pitfalls.
Mistakes in the home buying process usually are financially related and will end up costing you money.
Here are some of the biggest mistakes buyers make when they purchase a home.
1. Lack of Financial Preparation
One of the most frequent mistakes by first-time home buyers is poor financial preparedness.
Financial commitment to buying a home is huge, and one should be prepared for the costs involved.
Down Payment: Start saving for a down payment as early as possible.
The more money you pay upfront, the lower your monthly mortgage payments will be. Sometimes, a larger amount of payment also saves you from private mortgage insurance.
Interest rates on 30 year mortgages are now over 7%, so save accordingly.
Work out how much you can realistically save each month, then set yourself a goal to work towards saving to make a down payment.
Research first home buyer schemes and grants: These can be used to supplement your down payment
Know Your Credit Scores and Reports: Now, more than ever your credit score is a major factor not only in whether you can get a home loan, but at what interest rate you’ll pay.
Get a copy of your credit history from these three major credit reporting agencies, namely Equifax, Experian, and TransUnion.
Check and try to raise your credit score if necessary: Pay all your bills in time, keep credit card balances low, and also don’t apply for any other credit just prior to getting a mortgage.
Determining Affordability: Take a hard look at your monthly budget and determine how much you can comfortably afford for a mortgage payment, property taxes and insurance.
Consider your other monthly obligations such as student loans, credit card debt, car payments, etc, and your debt to income ratio
RE visiting with a mortgage lender or loan officer may also be able to give you a better idea or a more finite range of home affordability.
Plan for the Extras: Be ready to pay the extras that come with purchasing a home; closing costs, home inspections, and possible repairs.
Although this is within the inspection period, you are entitled to seller credits or concessions from the seller during this period.
Save money to cater to continuous maintenance costs and the sure-to-arise repairs once you own the home.
2. Ignoring the Importance of Location
You might just make a rookie error by not taking location seriously, especially if you’re a first-time homebuyer.
Distance from Work and Amenities: How close or far is the property you plan to buy from your workplace, not to mention from the essential amenities like schools, grocery stores, parks, or medical facilities?
A long commute can ruin your daily life and create stress for you.
Having access to amenities will help you go about your daily routines and even make it enjoyable.
Safety of the Neighborhood: Make sure that your chosen neighborhood is safe for your comfort level.
Research the crime rate and contact local law enforcement if needed.
Look for streets with good lighting, friendly neighbors, and a sense of community.
School District: If you have children or plan to raise some, the quality of the school is an important consideration.
Research the school district’s reputation and school ratings.
A good school district will not only help your children get quality education but usually increase the value of your property over time.
Future Development: Future development and growth of the place are crucial to consider.
Are there plans for infrastructure improvements, commercial developments, or community projects?
Resale Value: Even if you are not planning to sell your home soon, you have to think about its resale value.
3. Skipping Home Inspections
Of the homebuyers who did not get a professional inspection, more than 85% reported finding major problems after moving in.
Uncovering Hidden Problems: A professional home inspection allows you to discover hidden problems you otherwise wouldn’t have an idea of by simply taking a regular look.
Inspectors are trained in identifying big and small problems like structural problems, lacking plumbing, or electrical systems, mold or pest invasions, among many others.
Negotiating Power: A thorough home inspection gives you bargaining power.
You can request the seller remediate major problems or lower the sales price if the inspection reveals significant issues.
This ensures you get a better deal and won’t end up with a lot of surprise costs once the deal has closed.
Peace of Mind: As a first-time homebuyer, there are a lot of questions and unknowns about the condition of the property you are purchasing.
A professional home inspection brings peace of mind by confirming the overall state of the home.
Future Investment Planning: Along with indicating the prevailing issues with a home, a home inspection report also gives an idea about the future expenses.
For instance, it might indicate that the property is in an area with high property taxes, or does it fall within a desirable school district?.
4. Not Negotiating after the Inspection
Assuming you paid for and had an inspection conducted on the home, chances are there are plenty of items in the report that highlight issues with the home.
No home is going to be perfect.
Now is the time to get seller concessions.
For example, let’s say the inspection report comes back and it highlights the fact that the a/c unit is not reaching a desired temperature, and the inspector recommends that the a/c unit be serviced.
The seller pays for an a/c man to come check out the unit and he informs the seller the unit needs to be replaced.
Rather than paying for the unit out of their pocket, the seller simply gives the buyer a credit at closing.
They lower the price of the home say by 8 thousand dollars to account for a new a/c replacement.
That is a seller concession.
5. Overlooking Hidden Costs
Be aware of these costs and include them in your budget to avoid any surprises that may come later.
Closing Costs: Perhaps one of the most hidden costs that first home buyers fail to notice is the closing cost.
Closing costs are the fees that have to be paid for the completion of a purchase of a home by the homebuyer, and would include attorney fees, title insurance, appraisal fees, and loan origination fees.
They vary between 2% and 5% of the home’s purchase price.
Home Maintenance and Repairs: And all this while renting, you might have gotten used to having your landlord take care of these costs.
But when you are a homeowner, there are other routine maintenance tasks that you will need to take care of yourself.
These can include mowing the front lawn, cleaning the gutters, and making minor repairs.
Property Taxes: This is another fee that first-time homebuyers tend to forget when making a budget for their new home.
Property taxes on most properties are levied based on an estimation of the value of the land, and these too may change depending on the locality in which you reside. loss of your home.
Homeowners Association (HOA) Fees: These are the charges that are put in place to maintain shared amenities or services in the community, like the landscaping, maintaining a community pool, or security services.
You are, however, the homeowner, responsible for tasks upkeep about things like lawn mowing, gutter cleaning, and any minor repairs.
6. Not Shopping Around for Mortgage Rates
Many first-time homebuyers make the mistake of not shopping around for mortgage rates, often saving themselves thousands of dollars over the life of their mortgage.
How Mortgage Rates Work: The rates you pay will affect just how large your mortgage repayment each month will be and the total amount you will pay for your property over its lifetime.
Don’t Settle for the First Quote: Shopping around for lenders and rates can get you the best deal.
Different lenders might base rates on different sets of criteria; shopping around works to get the best deal.
Things to Consider: Loan term will be 15 or 30 years, type of interest fixed or variable. Total cost of the loan will be determined by these factors.
Comparison Sites: Sites and Mortgage Calculators comparing rates allow you to make your decision.
Mortgage Pro: A mortgage broker or lender who will walk you through the process so you can access the best rates and deal with the hassle of the mortgage process.
7. Falling in Love with the First House
You will fall in love with the first house you see for sure if it fits most of your criteria and indeed feels like your dream home.
Needs and Wants: Before You Start Viewing Houses Prepare a Needs and Wants Checklist.
A need is a requirement that you would not buy a property without; it might be the number of bedrooms or proximity to the local school.
A want is also something that would be nice to have, but you can still buy that house without it.
Set a Realistic Budget: Among the most important parts of home purchasing is to set a realistic budget.
Your financial scenario is shaped by your down payment amount, credit score, and debt-to-indebtedness ratio.
Look not just at upfront costs but also at monthly expenses like mortgage payments, property tax, and insurance.
Do Your Homework: Look for listings online, go to open houses, and have a real estate agent with his or her hand on the ground to know the pulse of the market.
Learn about the general market value of similar homes in the area by having a comparative market analysis done for you.
Take a drive around various neighborhoods, inquire about the public transportation, and take into account such factors as schools and amenities.
Slow Down: Buying a house is an enormous investment; do not hurry into this.
Be aware of these costs and include them in your budget to avoid any surprises that may come later.
Closing Costs: Among the most common hidden costs that first-time home buyers fail to notice is the closing cost.
Closing costs are fees that a homebuyer must pay for the finalization of the purchase of his home; these costs would include attorney fees, title insurance, appraisal fees, and loan origination fees.
They range from 2% to 5% of the purchase price of the home.
Home Maintenance and Repairs: And all this while renting, you might have gotten used to having your landlord take care of these costs.
But as a homeowner, you will be responsible for other routine maintenance tasks, including the upkeep of the front yard, cleaning the gutters, and fixing minor repairs.
Property Taxes: Property taxes are yet another expense that most first-time homebuyers often forget to take into account.
These taxes are usually based on the estimated value of your property and can vary depending on where you live. loss of your home.
Homeowners Association (HOA) Fees: These fees contribute to the maintenance and upkeep of common areas in the community, such as landscaping, pool maintenance, or security services.
However, as a homeowner, you are responsible for maintenance tasks like mowing the lawn, cleaning the gutters, and fixing any minor repairs.
Property Taxes: Property taxes are another expense that first-time home buyers sometimes forget to consider.
These taxes are typically based on the assessed value of your property and vary depending on where you live. loss of your home.
Homeowners Association (HOA) Fees: These fees contribute to the maintenance and upkeep of common areas in the community, such as landscaping, pool maintenance, or security services.
Property Taxes: Another cost first-time homebuyers sometimes forget to factor in is property taxes.
They are usually computed based on the assessed value of your property and may differ depending on the location to which you move.
8. Failure to Understand Fine Print
Most first-time homebuyers are an itch to rush through reams of paperwork, while others hardly understand the mortgage terms and conditions.
This will work out to be costlier surprises with new traps down the line for you.
Mortgage Terms and Conditions:The rate of interest, the amount of loan, amount of monthly mortgage payment, and additional fees or charges are involved.
Know exactly what your credit score is and if you qualify to be given the loan.
Additional Cost: These might include property taxes, homeowner’s insurance, private mortgage insurance-if that is a factor-and even homeowner association fees.
Terms of the Purchase Agreement:This is a contract that will contain the actual details of the transaction-things like contingencies, timelines, and responsibilities of the buyer and seller.
This will help you know what the budget actually is and work through financing options that includes down payments and closing costs.
Final Take-aways
An offer on a house is an intimidating move; however, knowing common pitfalls will aid you in obtaining your perfect dream house for the right price.
A good realtor is one who can diffuse your emotions by making decisions with patience in order to forge a successful home purchase !
We buy houses companies can be a good options for sellers wanting to get quick cash for their home.
As mentioned, research the market and seller, get pre-approved by the lender, leave some wiggle room in your offered amount, compare lenders when financing, avoid contingencies that might jeopardize your sale, and seek the right answers in the closing process.
That way, you will manage to make a competitive offer, which is going to be unbeatable compared to others.