Are you finally ready to jump into the home buying deep end? Do you want to move from renting to owning, but you’re still a bit apprehensive?
Mistake #1 – Draining Your Savings
Before you go into buying a home for the first time, make sure you know what it costs. You will need money for the down payment, closing costs, and an emergency fund before you consider buying a home.
The biggest mistake first-time homebuyers make is draining their savings. Owning a home can be expensive and adjusting from renting to owning comes with many new expenses.
Make sure you calculate all the expenses before you decide to buy. Don’t make the mistake of draining all your savings because you’re not prepared or because you decided to buy a more expensive home.
The easiest way to avoid this mistake is to have an emergency fund. Save three to six months of housing expenses and other monthly bills before you buy. Don’t use this money for closing costs or your down payment. In fact, don’t use it unless you run into a real emergency.
Mistake #2 – Applying for Credit Before Moving In
Once you’ve applied for your mortgage, you need to cut off all new forms of credit until you’ve moved into your new home. Even applying for something like a cell phone can cause an issue and lead to problems getting approved for the mortgage.
Don’t start financing furniture, electronics, a new car, or anything else. Put a pause on all other financial decisions until you’re settled in your new home.
Many first-time homebuyers don’t understand how much their credit can change if they take out a new loan or credit card. If you were on the line of approval before, you could end up below it due to making this first-time home buyer mistake.
Even if you still get approved, you may lose that beautiful low-interest rate. Don’t mess with your mortgage. Avoid any new credit until after you’ve been fully approved and you’ve moved into your home.
Mistake #3 – Underestimated Costs
You’re new to homeownership, so a bit of forgiveness is necessary. However, you can avoid this big mistake made by first-time homebuyers by having an emergency fund.
Many first-time buyers don’t estimate the ongoing costs of owning a home very well. Homes come with maintenance and repairs. You’re used to a landlord handling these things and now they will be your responsibility.
Make sure you have plenty of money in savings and make sure you always over-estimate and adjust later. Even utility bills can be underestimated and cause issues.
Mistake #4 – Not Getting Pre-Approved for a Mortgage
Did you already make this mistake? Have you fallen in love with a home you simply cannot afford or get approved for? You’re not alone. First-time homebuyers are often guilty of shopping before they get pre-approved for a mortgage.
This is a mistake you want to avoid because it will cause you bigger issues. The last thing you want to do is shop outside your price range or waste time looking for homes you won’t get approved for. Instead, take the time to apply for a mortgage and get pre-approved, NOT prequalified.
Make sure you actually have a pre-approval letter, as this will carry weight when you make an offer. It will also help your real estate agent understand you’re price range and how serious you are about buying.
Mistake #5 – Buying Too Much House
It’s pretty clear what this mistake can do to your finances. If you can afford a $1,200 mortgage payment, but you were approved for a loan with a $1,600 payment, you’re setting yourself up for failure if you take the higher amount.
Lenders may approve you for more than you can really afford. Always look at your budget and consider all the expenses. Over-estimate if you’re not completely sure and make sure you lean towards buying a more affordable house, even if the higher amount gets you the so-called perfect dream home.
You may have that dream home for a few years, but it will catch up to you. If you buy a house you can’t afford, you’ll end up struggling if you need to repair something or you run into another emergency. This will become even worse if you don’t start with an adequate emergency fund, too.
Mistake #6 – Letting Emotion Into the Decision
Emotional home-buying decisions often backfire. First-time home buyers make this mistake often and let their emotions take over. Don’t make this huge financial decision based on emotion.
Yes, emotions are part of the process. Yes, you will feel a certain way when you find a house you love. Yes, you may cry, show excitement, or show other emotions during the process.
While this may all be true, natural, and normal, the final buying decision cannot be made emotionally. Look at what the numbers say and make a wise financial decision.
This doesn’t mean you buy a house you don’t like, but it could mean buying the more affordable home that’s not exactly perfect. If it’s a better financial choice for you, it’s a more perfect home than the one that looks and feels more like a dream.
Mistake #7 – Choosing Home over Neighborhood
First-time home buyers may fall in love with a home and never really look at the neighborhood. This is a big mistake. Always look at both the home and the neighborhood. Remember, you will be living here, so you want to make sure you love the location, the area, and the home.
Don’t get caught in the trap of falling in love with a home that’s not in the right neighborhood. You may love it now, but a year from now, will you hate the commute to work or the schools your children attend?
Make sure you look at the neighborhood first. Choose neighborhoods you like, and then start looking for homes for sale in those areas. This is the easiest way to avoid making this first-time home buyer mistake.
If you can avoid these seven first-time homebuyer mistakes, you’ll be in better shape when you buy your first home. Even just one of these mistakes can sink your home buying ship. If you make two or more of these mistakes, you could find home buying to be difficult, frustrating, and not what you expected.