Article

12 First Time Home Buyer Mistakes to Avoid

Posted by Jessica Akright on Jul 14, 2016 05:00:00 AM

Topic: ALL

Husband and wife with their dog sitting on the couch

Working with a trustworthy, experienced lender can help prevent many first time home buyer mistakes, but it’s up to you to understand the process, set a budget, and pay attention to details.

These are our top 12 mistakes new home buyers should try to avoid:

  1. Not deciding if renting is smarter.  The many home buying fees, in addition to maintenance, insurance, taxes and more could make it smarter to rent until you’re in a better position financially.  This calculator can help you compare renting to owning.

  2. Underestimating homeownership costs.  Maintenance, repairs, and taxes take many homeowners by surprise. And, those costs tend to go up, not down over time.

  3. Using only income to decide how much house you can afford.  Your fixed expenses, from student and car loans, utilities, insurance, food, and childcare also need to be considered. Don’t forget about unforeseen future expenses such as a medical emergency or having a child.  

  4. Not willing to wait.  First time homebuyers often have their eye on a dream home that’s beyond their budget. But it may be smarter to start small and slowly move up to a bigger home or a better neighborhood as income increase and you build equity.

  5. Not getting pre-approved.  Don’t wait until you’re ready to start house hunting before contacting a lender. When you go to get pre-approved, you may discover you need to save more, supplement your income, or clean up credit problems first.  

  6. Not knowing your credit score.  Borrowers with the highest scores get the lowest rates and fees, which can save a bundle. Check your score annually. You can raise your score by reporting errors and improving how you manage bills and credit cards.

  7. Choosing the wrong mortgage.  Research your financing options. A 30-year fixed-rate mortgage is typical for new buyers, but other options may make more sense for your situation. If you’ll be relocated in a few years, an adjustable-rate mortgage could be a better choice.  If you’re older, a shorter term with higher payments will have you mortgage-free by retirement. Your Loan Officer can help you better understand your options.

  8. Skipping the home inspection. Don’t try to save money by skipping this important step.  A qualified inspector can identify issues that may need repair or replacement now or in the near future so you can negotiate with the seller. Ask friends, family, your realtor, or lender for recommendations look for listed inspectors on the sites of their professional associations.

  9. Assuming foreclosures are always great deals.  Just because a previous owner owed $250,000 on a house before the bank foreclosed doesn’t mean it’s worth that now. What are other homes in the neighborhood selling for? Has the home been vandalized or not maintained? High repair costs may not be recovered when you sell.  

  10. Failing to include a contingency clause.  A home inspection contingency in your purchase offer allows you to back out if you cannot successfully negotiate a remedy with the seller for identified problems.A financing contingency protects you if you lose your job and the loan falls through or the appraisal comes in over the purchase price.

  11. Relying on online home values and descriptions. A good realtor can give you recent selling prices of comparable homes so you don’t lose a deal with too low an offer. Drive past homes and through neighborhoods on different days and times. Is the yard sunny enough for a garden? A nearby highway too noisy? Streets safe for kids? Neighborhood full of barking dogs?  Do your research.

  12. Not being flexible. In a competitive market, see potential in a property that might not meet all your criteria. Arguing over minor details like easy-to-change decorating could cause the owner to sell to someone who loves the house more. Be willing to compromise so you can take advantage of an otherwise great opportunity.

An experienced Loan Officer can help you avoid many of these mistakes and demystify the lending process. To get you started in the right direction, we’ve prepared a few tips to help you better understand the mortgage process