Congratulations! You have decided to buy your first house. Before you jump into the process, take some time to educate yourself by learning some of the common mistakes first-time homebuyers often make. Having an awareness of these prevalent – and potentially dangerous and expensive – mistakes will help you avoid making them yourself.
Running before walking. This is easy to do once the decision to buy a home is made. It means rushing off looking at homes, surfing the web or calling on advertisements before doing some preparation. Not spending time preparing can be a disaster. Remember, if you hastily make a contract to purchase a home and change your mind, the chances of being released from the contract are almost non-existent.
Over-buying the first time. Being house poor is a very uncomfortable existence. A large, beautiful home with little or no furniture tends to be cold. A life where every dime of your income goes to pay for a house wears thin and is a cause of family stress. Pushing yourself to your financial limits leaves you vulnerable in case of economic downturn.
Finding out too late that you have no representation. This can be a nasty surprise when you assume that the agent with whom you are working represents you when they actually represent the seller. How does this happen? By not taking the time to familiarize yourself with the laws regarding agents. Or, by rushing to look at homes advertised, and not having a relationship with an agent who acts as your representative. Another pitfall is when you try to represent yourself in the purchase of a home, thinking that you will save money. That may be the case, but it is just as likely that you will run into a seller who is looking to keep the commission savings in their pocket. Without representation and the use of a Comparative Market Analysis, how do you determine a realistic selling price for a property? Consider hiring a REALTOR® as a buyer’s representative, whose duty is only to you. A buyer’s rep is paid out of the seller’s commission payment.
Not comparing mortgages. There are far too many variables, types of mortgage, terms, lenders and amounts of points, etc., not to investigate all of your options. Do not simply accept the first plan you see, whether from a mortgage broker or on the recommendation of a friend. Spend time comparing to get the most advantageous plan for your requirements and financial situation.
Not getting mortgage pre-approval. Prequalification and preapproval are important parts of the home buying process. Not only will it give you an exact price range for your purchase, pre-approval will add a great deal of strength to your negotiating power.
Waiting for the perfect home. Many first time buyers make the mistake of thinking that they will find a home that has 100 percent of their wish list if they just look long enough. With the thousands of variables available in housing, including location, style, size, amenities and condition, this could be an unrealistic goal. As a result, these buyers pass by homes that meet 90 percent or more of their requirements only to eventually give up and purchase homes with fewer of their requirements because they become tired of the home search process, or while they wait for the perfect home, housing market prices, and often mortgage rates, continue to rise. To avoid this, prioritize your wish list and identify your most important needs and your most desired wants, and select a home that meets the majority of them.
Shortcutting the inspection process. This can involve skipping a whole house inspection completely in order to save a relatively small amount of money. You run the risk of not exposing potentially expensive or even hazardous defects in the property. Protect yourself by investing the money and time for a professional home inspection.