Dreaming About Buying Your Own Home? If you’re a first-time homebuyer, there are some financial decisions you could make that you didn’t even know are big “No-Nos”. Here are some of the more common mistakes and tips on how to avoid them.
Mistakes to avoid before you start the hunt:
- Not knowing what you can really afford. Know how much you spend each month and know exactly what you can afford to put toward your home each month. A good, experienced lender should be willing to give you some counsel on how to stay within your budget.
- Forgetting it’s going to cost you more than the mortgage payment. Home-owner’s insurance, property taxes, utilities, and a savings plan for maintenance all have to be considered. If applicable, HOA fees can take a big bite out of how much of a mortgage you can afford.
- Getting “spendy”. Great credit is paramount to getting a reasonable interest rate on your mortgage. In the months, or even years, before you start house hunting, keep the spending under control. Make sure your bills are paid on time, try not to make too many major purchases on credit and if you’re credit needs some rehab, now’s the time to get it.
- Not shopping around for a mortgage lender. Not all mortgages are created equal. Make sure you find a lender you trust and don’t be intimated to ask lots of questions. It’s their job to make sure you fully understand what you’re getting into.
- Not finding a great agent. A real estate agent should be your trusted adviser. You want to feel comfortable with their guidance and trust that your best interest is important to them. And since finding a home can take a while, make sure you find someone you like.
Mistakes to avoid while you’re looking:
- Over Borrowing. Just because a lender qualifies for a certain loan amount, doesn’t mean it’s in your best interests to buy that much. Remember to stick to the budget you set before you started looking. Many buyers have problems with this one. “It’s just a little bit more…” can mean the difference between being comfortable with your monthly payments and feeling like you’re on the edge of doom.
- Forgetting to work solely with your agent. If you’ve hired an agent that you trust, you want to make sure you do all your communicating through them. It’s their job to protect you and taking it upon yourself to talk to the sellers or their agent could adversely impact your negotiations should you decide to make an offer on a home. This is even true if you want to go visiting open houses. Taking your agents business card with you to an open says, “My agent is serious about taking care of me.”
- Not telling the truth about what you think. This is for all you “people-pleasers” out there. If you’re not in love with the home, don’t just “settle” to avoid disappointing other people, such as your agent or spouse. This is a big investment!
- Expecting too much. You want your home to meet as many of your needs as possible but there just isn’t any such thing as a “perfect” home. Before you start looking your agent should have helped you figure out what your top priorities are. Find the home that meets those needs and make an offer. By the way, having the right expectations means not looking for a half a million-dollar home with a $250,000 budget. You’ll just frustrate yourself!
- Not staying objective before your offer is accepted. If you don’t want to get your heart broken, stay hard-hearted – at least until you have a contract. In a strong seller’s market, the home you think you can’t live without may have multiple offers on it. And, until you’ve gotten through the inspection and appraisal, you won’t know if there may be reasons why the deal isn’t going to work. A good real estate agent will try and keep you realistic about these things.
- Not checking out the neighborhood. How’s the traffic around the home? What about commute times? Is it in the right school district? Does it have the neighborhood amenities you need? When you buy a home you’re also buying into a community. Make sure it’s where you want to be.
- Not looking into the HOA. If there’s a Home Owner’s Association attached to the home you want to buy, make sure it’s one you can live with. They can have strict regulations! And don’t forget to make sure you can afford the monthly fee. Also, remember that, the more you pay in HOA fees, the less you can afford to put toward your mortgage payment. Make sure that what you’re getting value for what you’re paying.
- Not shopping for a great homeowner’s policy. If you don’t already have an insurance company you know you can count on, don’t skimp on doing the research to find one. The rates are all over the place. Make sure the rates you’re being quoted are reasonable and that the coverages are what you need. Keep in mind though that rates aren’t everything. You need to know the company that’s covering you is actually going to pay out should the need arise. Also, remember to ask about bundling. If the same company covers your home, car, etc. you might get better rates.
- Not getting a home inspection. A $500 inspection fee can literally save you thousands in repair costs. While an inspection can’t guaranty there won’t be problems down the road, it might just stop you from making a huge mistake if problems are found. Or if you still want to move forward an inspection may give you some leverage in negotiating with the seller.
- Removing contingencies in a hot market. Multiple offer situations can make it tempting to remove contingencies when submitting an offer. Those contingencies are for your protection. It’s better to lose out on the home than risk, being obligated to purchase the home if lots of problems arise.
- Not reading what your signing. You need to understand what you’re signing. There’s a lot of paperwork, but it’s there to protect you. Don’t hesitate to ask your agent to explain anything you don’t understand.
Mistakes to avoid after your home purchase:
- Forgetting to claim tax write-offs. As a homeowner, you get to deduct the cost of mortgage interest, property taxes and, if you have it, mortgage insurance. These deductions can save you thousands in taxes every year.
- Rushing to buy things for your new home too fast. Don’t be afraid to live with your new home for a while so you can figure out what you really need. Running out and getting lots of new furniture before you settle in could mean regrets. It takes time to make your home yours. It’s a process. Let it happen.
- Not staying on top of maintenance and upgrades. Make sure to keep your home in tip-top condition and you’ll save yourself a lot of headaches later. And if you’re planning to do upgrades, make a plan that spreads out the costs and lets you enjoy them while your still in the home. More than likely the day will come when you’ll be ready to sell and move on to your next adventure. If you’ve stayed on top of things, your sale will go much more smoothly.
- Losing touch with your real estate agent. Really, this should be your agents job, but not all agents are good at keeping track of their previous clients. Real estate agents are great resources. They can help you find a great plumber, painter, electrician, etc. when you need one. Even if your agent doesn’t know someone off the top of their head, they have a great network of other agents and service people they can go to for referrals.
I hope, you find some of these suggestions to be helpful. And that some of them will keep you from getting into trouble. If you need further clarification or have any questions, it would be my privilege to help you. Happy house-hunting!
Laura Bracklein, Keller Williams Premier Realty