Closing on a new house is always exciting – but even more so for first-time homebuyers. As first-time buyers always discover, there’s no feeling quite like having a place to truly call “home.”
But the home-buying process can be filled with hurdles and challenges, each of which can lead first-timers to make mistakes that more experienced buyers might not.
There’s good news, though: Many of these common first-time homebuyer mistakes are easily avoidable. You have an opportunity to learn from those who have gone before you and to navigate the home-buying process as adeptly as anyone else.
To help you get started, here’s a look at five of the most common first-time homebuyer mistakes that you should aim to avoid.
Mistake No. 1: Setting an Unrealistic Budget
Homeownership comes with many costs. Some of those costs are obvious, and others are more nuanced.
For example, most homebuyers need a mortgage. That mortgage will require a monthly payment – part of which goes toward principal and part of which goes toward interest.
But you will also pay taxes and insurance on your property, sometimes as part of your monthly mortgage payment (if your taxes and insurance are escrowed) and sometimes independent of the mortgage payment. You may also need to pay private mortgage insurance, homeowners’ association dues and other monthly obligations.
And don’t forget about maintenance, repairs and upkeep. When you transition from renting to owning, you no longer call your landlord when the air conditioner goes out or when the sink backs up. You make the calls – and you pay for the repairs.
All of these expenses add up. It would be a huge mistake to look solely at principal and interest when calculating how much you can spend on a home. You want to look at the full financial picture, which includes taxes, insurance and these many other costs.
Mistake No. 2: Timidly Entering the Market
No individual or couple looking for a new home wants a property that’s so-so or almost good enough. Rather, people shopping for homes want properties they can fall in love with.
But here’s the catch: There’s a lot of competition for homes that make prospective buyers swoon. Which is why you can’t enter the market timidly – you need to make the right preparations, and you need to be ready to take action.
How can you prepare for the home search? Start by getting a preapproval letter from a mortgage lender. When you have a preapproval letter in hand, your offers carry far more weight. The letter demonstrates that you have access to the financing needed to close on the home. In competitive bidding situations, you’re going to have a hard time gaining traction without a preapproval letter.
Also, prepare for the home search by determining what you want in a home. Create a list of must-haves and a list of nice-to-haves. Your must-have list might include quality schools, proximity to work or a certain number of bedrooms. Your nice-to-have list might include a swimming pool, a low-traffic street or a second living area.
These are small preparations that take little time to make. But they will pay off in the long run as you search for your first home.
Mistake No. 3: Representing Yourself
There’s another important preparation that first-time homebuyers should prioritize: finding the right real estate agent. A quality real estate agent is an invaluable source of guidance and expertise as you navigate the home-buying process. He or she can also take care of the many tasks needed to get you to a successful closing.
What about the cost? This is one of the great benefits of being a first-time homebuyer: There is no cost to you, because an agent’s commission is almost always paid out of the seller’s proceeds.
Make sure you’re getting an experienced agent, too – someone who can deliver outstanding service and great results. Ask friends and family for agent recommendations. In the absence of a strong recommendation, look for an agent who specializes in the types of properties you like and who knows the area that you’re targeting.
Mistake No. 4: Letting Emotions Get the Best of You
Yes, searching for your first home is an exciting experience. But sometimes that experience can become overwhelming, and it’s important to make sure you keep your emotions in check.
Don’t get too selective. As a first-time homebuyer, you’re looking for a property where you can be comfortable, where you can lead the lifestyle you want, and where you can build up equity to use in buying your next home. If you get caught up in looking for perfection, you may find yourself looking for a long time.
You don’t want to get too selective, but you also don’t want to get too impatient. The home search can last for weeks or even months, and you may even put in some losing bids before you win one. But, if you get impatient, you’ll start to compromise on your list of must-haves – which leads you toward settling for a so-so or almost-good-enough house.
So be patient without drifting toward being too selective. Lean on your agent for guidance. And stick to your list of must-haves. In the end, you’ll be rewarded with a property that is perfect for your life stage.
Mistake No. 5: Getting Too Soft
Buying a home is a transaction between two parties. The buyers want a home they love at a price that offers value. And the sellers want to maximize their return on a significant investment. There’s going to be push and pull, give and take. Just make sure that you don’t get pushed around.
A buyer should be willing to work with the seller in moving toward a closing date. But don’t get soft as new information emerges during the inspection, the title review or the appraisal.
It’s common for either party to ask for concessions prior to the closing date. For example, if the inspection reveals a problem that needs to be addressed, the buyer should ask the seller to make the repairs, lower the price or offer another concession.
The last thing you want to do is spend more on a home than it’s worth or move into a home that immediately needs serious work. So ask for the concessions, be firm and back out of the transaction if the seller refuses.
Do You Have the Expert Guidance You Need?
So many first-time mistakes can be avoided when you secure a quality real estate agent. After all, that’s what a real estate agent is for: to help you anticipate challenges and to overcome or avoid them altogether.
I work each day with both buyers and sellers, helping them to find properties they love and to enjoy the return on investment they’ve always wanted. If you need help getting your search for a first home on the right track, contact me anytime at pthessen1@gmail.com.
-submitted by Perry Thessen
