Many folks are gearing up to buy their first
place? In the end, your aim is to end up with a home that you love at a price
you can afford. This sounds simple enough.
Unfortunately, many people make mistakes that prevent them from
achieving this simple dream. Here are 10 mistake tips to avoid making that
could put a hold on that sold sign.
1.
Not Knowing How Much You Can Afford
Sub-prime
mortgage was a total mess and left a lot of people in dire distress. Now, we know what the bank says you can
afford and what you know you can afford or are comfortable with paying are not
necessarily the same. First, make a budget… a list of all of your monthly
expenses except for rent. ALL YOUR
EXPENSES, no matter how little (groceries) or large (loans) they seem. Be sure
to include the annual ones like your insurance premiums, vacations, etc…Then,
subtract this total from your take-home pay and you'll know how much you can
spend on your new home each month. Once you learn what you can afford, if you
want to spend more on housing, then you have to first increase your income and
reduce your expenses and debt before you even start looking.
Don’t even
bother looking at homes that are outside your price range. That will just tempt you to go into a
mortgage that you can’t afford, stretch way beyond your financial means and
then you won’t be satisfied with the house that you get. After you get your new home, and you want to
just admire other houses as an extracurricular activity, that is fine… just
wait until your house-shopping is done.
2.
Not Considering Other Expenses
When you
become a homeowner, you have expenses additional to your monthly mortgage
payment. You will have to pay property taxes, insuring your home against
disasters and making any repairs the house needs. For other types of homes like
condos, you have to pay a monthly maintenance cost due to the homeowner's
association, in the form of condominium fees.
3.
Skipping Mortgage Qualification
What you
think you can afford and what the bank is willing to lend you may not
match. These are affected by poor
credit, unstable income and so on. Therefore,
make sure to get pre-approved for a loan before placing an offer on a home.
Otherwise, you are just wasting your time, your agent’s time, the seller’s
time, and the seller’s agent’s time. It
will also save you the embarrassment and distress of losing thousands of
dollars after signing a contract and then the bank won’t lend the amount that
you need.
Although you
may have been pre-approved for a mortgage, things change at the last
minute. You may finance or purchase
something that causes your credit score to change and so, the loan falls
through.
4.
Not Hiring an Agent or Using the Seller's Agent
Never walk
into an open house without having an agent or someone you’re working with in
dealing with real estate. Agents have
an ethical rule to act in both the seller and buyer’s interests. However, we all know that it doesn’t always
work out for the best. The seller’s
agent is working for the seller, not for you.
His/her desire is to satisfy their client, the seller. Contact your own agent before dealing with a
seller’s agent.
5.
Being Too Picky
Make a new
home wish list, and be flexible so that you don’t lose heart in owning your own
home. First-time homebuyers often have
to compromise on something because their funds are limited. You may have to
make some repairs to the home or forget about that extra bedroom. If necessary, go ahead and continue renting
until you can afford everything on your wish list. The bottom line is that you will have decide how important it is
for you to become a homeowner now rather than years from now.
6.
Not Seeing a House for it’s Potential
Even if the
décor is not what you desire, you can live with it for a while in exchange for
getting into a house you can afford. Later on, when you can afford it, make the
changes desired by hiring a contractor.
That is cheaper that paying a larger mortgage every month. If the home otherwise meets your needs in
terms of the big things that are difficult to change, such as location and
size, don't let physical imperfections turn you away.
7.
Compromising on Important Things
If this is a
home that you are purchasing for living in and not for investment, plan for
what you will actually need and for what your future plans are. If you are planning to have a large family,
then don’t get a two-bedroom home. It's
true that you'll probably have to make some compromises to be able to afford
your first home, but don't make a compromise that will be a major strain on you
in the end.
8.
Being Swept Off Your Feet with Upgrades
Don’t fall
for the minor upgrades and cosmetic fixes.
They look as if they are inexpensive.
However, they are tricks that play on your emotions and in the end, it
nickel and dime you to death, thus increasing your price a lot higher than you
planned. It can sometimes go up and
over $40,000 extra in these “minimal” upgrades. That doesn’t sound like minimal to me. Since you are on a specific budget, look for houses that has
potential that hasn’t been touched yet.
You will be able to reach its’ potential after you buy and pay less for
the house. Also, that will cause an
increase in the equity of your home.
9.
Neglecting to Inspect
Before you
close on a sale, you need to know what shape the house is in. That is where inspections take a
handle. You don't want to get stuck
with a money pit or a fixer upper. Don’t make decisions based on your
emotions. Be sure to keep your feelings
in check and think logically about the full picture of the houses’ condition
and whether your investment is a sound one.
This will help you financially in the end.
10.
Not Thinking About the Future
It's
impossible to predict the future of your chosen neighborhood, but pay attention
to the information that is available to you.
That will help you avoid unpleasant surprises down the road. Also, don’t be afraid to speak with your
neighbors about what they think about the neighborhood with all the amenities.
Some questions you should ask about the property
of interest are:
- What kind of development plans are in the works for your neighborhood in the future?
- Is your street likely to become a major street or a popular rush-hour shortcut?
- Will a highway be built in your backyard in five years?
- What are the zoning laws in your area?
- If there is a lot of undeveloped land? What is likely to get built there?
- Have home values in the neighborhood been declining?
Conclusion
Buying a first home can be stressful and overwhelming. It has a lot of potential pitfalls. If you're aware of those issues ahead of time, you can protect yourself from costly mistakes and shop with confidence.
Buying a first home can be stressful and overwhelming. It has a lot of potential pitfalls. If you're aware of those issues ahead of time, you can protect yourself from costly mistakes and shop with confidence.
Buying a home is the largest purchase most people
will ever make, but it doesn’t need to be the most difficult.