Purchasing your first home is a liberating, exciting, and satisfying experience. As soon as you close, you’re free of the pitfalls of renting, and you can paint the walls any color you’d like, park as many cars in the driveway as you need, and jump up and down on the floors at midnight without having to ask permission or getting in trouble.
It’s easy to get swept up in the excitement and anticipation of buying your first home, but if you’re not careful, you could end up making some costly mistakes. Here are some of the mistakes you’ll make if you go into the process unprepared:
Letting Your Less-Than-Great Credit Score Affect Your Mortgage
It should come as no surprise that your credit score is a big factor in the home buying process. What may surprise you, though, is the rate you’ll qualify for if your score is less than what your lender wants it to be. While you may still be able to get a loan with a lower credit score, the rate on the mortgage may be more than you can afford.
The higher the rate, the more you’ll have to pay overtime, just as the result of a three-digit score that can be affected from one late payment.
Before purchasing your first home, be sure to check your credit score and do everything you can to raise it to where it should be. A better credit score will help you more easily qualify for a mortgage loan and will help you receive a better rate, saving you money in the long run.
Not Shopping Around to Different Lenders for the Best Rate
You don’t have to go with the first mortgage lender you talk to – you can shop around and find the one that best suits you, your needs, and will give you the best rates. Just like you can shop around for a product online and find the best price before making a final purchase, it is important to know your options.
Talk to a few different lenders and get recommendations from family and friends who have purchased a home in your area before. If you go with the first lender you talk to, you may be unhappy with the service and the rate they give you, and it will only be more frustrating later when you find out another lender would’ve been a better fit for you.
Not Hiring a Relator and Being Forced to Settle
There’s a misconception that going it alone can save you money because you won’t have to pay a realtor a commission. However, that doesn’t save you from closing costs, and realtors are actually able to save you more money thanks to their knowledge, experience, and expertise.
Not only are realtors cost effective, but they also have access to databases that provide them with listings you won’t always find on Zillow or in your local classifieds. If you try doing it alone, you may not be able to find your dream home and will have to settle because of your limited options. With a realtor, though, you’ll gain access to as many homes that are on the market and will be able to find and close on the perfect one.
Losing Out on a House You Want Because You’re Not Pre-approved
A lot of times, it’s all too tempting to jump into the housing market and start touring houses right away. While there’s nothing wrong with being excited about finding your new home, you could then lose it quickly if you’re not pre-approved beforehand.
Getting pre-approved by a lender will help you make an offer, showing there likely won’t be any issues closing after you get it under contract. A pre-approval increases your negotiating power, saves you time, and, depending on your market, that could make all the difference in whether or not you get the house.
Buying a Home That’s Out of Your Budget
The price of a house is significantly more than what the listing price is showing you. Additional costs include closing costs, the cost of the inspection, the cost of the appraisal, the down payment, and more. In addition to these costs, once you own the house, there’s the monthly mortgage payment which may be higher than expected since it will include different insurances and fees.
And on top of all that, there’s the monthly cost of utilities (most of which have an activation or setup fee for the first month), any HOA fees if you’ve purchased a home in an HOA, as well as the cost of the cleaning supplies and other necessities.
Even if the listing price is in your budget, you must consider the additional costs and fees you’ll have to pay once you’ve closed on and taken ownership of the house. Will it still be in your budget then? To be sure, include homes in your search that are well enough below your original budget.
Biting Off More than You Can Chew
Thanks to the shows on HGTV, buying a home that needs work or looking at houses that have potential rather than exactly what you’re looking for seems glamorous and tempting. While a good home improvement project can be rewarding and a lot of fun, if you’re not careful, you could end up biting off more than you can chew.
If you’re looking into fixer-uppers, whether to flip or make into your home, make a list of all of the things you’ll have to fix and evaluate that list from a realistic standpoint. Consider how long it will actually take you to get those projects done and whether or not it’s worth the time and the cost.
How to Avoid These Mistakes
You may have noticed that knowing exactly what you’re getting into beforehand can help prevent you from making some of these first-time homebuyer mistakes. Although buying your first home is exciting, taking a step back and looking at it from a realistic standpoint can help you avoid frustration and high costs.
What’s the biggest lesson you’ve learned about buying your first home so far?