Buying your first home is an exciting experience; however, there’s a lot more to it than picking one you like and paying off the mortgage! Unfortunately, many first-time buyers are not fully aware of the potential pitfalls along the way, and sadly end up paying the price.
There are a number of mistakes first-time buyers may make – mostly in an attempt to save a few dollars. In reality, more than 80% of homeowners wish they had done things differently when they look back. Read on to discover 8 of the most common – and costly – mistakes first-time home buyers have made and how to avoid them.
Letting Your Heart Rule Your Mind
It’s all too easy to let your emotions get the better of you while house hunting and it’s not unusual to fall in love with somewhere on looks alone. However, many sellers go to great lengths to ‘stage’ their homes – making them look larger than they are and quite irresistible. Scratch beneath the surface, however, and you may find all is not what it seems.
Always take a step back and really think about the house you’re viewing. Never push the downsides away, as they’ll inevitably come back to haunt you. Imagine what the place will look like once it’s lived in.
Skipping the Inspection
A house inspection could well be the shove you need to tell you that that dream house is just a facade and that it could be a real money pit due to the repairs needed to make it livable. However, a huge number of home buyers skip the inspection in an attempt to save a little extra cash or to save time on closing a deal.
Inspections typically cost between $300 and $800 and are worth every penny. Many of us can’t read the danger signs that hint at a house being badly in need of repair, or having a leaking roof, or being in a potential flood zone. An inspector can tell you exactly what state the home is in and advise as to how much you’ll need to spend to get it up to scratch.
Not Hiring a Real Estate Agent
Most real estate agents will almost certainly insist on you having a house inspection, either before making an offer or as a part of your offer price. They will also prove an invaluable ally, helping you find a wider range of properties to view – tailored to your needs – and negotiating the best prices throughout the process.
It’s all too tempting to neglect to hire one, however, when thinking about the savings you could make. However, a good real estate agent will more than cover the cost of their fee by negotiating better prices and preventing costly mistakes.
Always do your research and ensure you find a real estate professional who is right for you. Don’t be tempted to hire the agent making the sale of the property you’re hoping to buy, as they will inevitably have the seller’s best interests in mind.
Forgetting about Closing Costs
With a real estate agent, you’ll also be informed of all the relevant closing costs. However, it’s important to do your own research in advance to see just what expenses are involved in buying a home. Often, the closing costs are between 1.5% and 2.5% of the purchase price, but they can be as high as 4%. This figure generally needs to be paid as a lump sum on top of your down payment and is not included in your mortgage.
Consider legal fees, land transfer tax, moving costs, insurance, taxes and utility installations, and be sure to seek out the hidden costs of buying a home. By doing this research in advance, you can budget for the closing costs and ensure you’ve saved enough to avoid relying on credit cards.
Spending More Than You Can Afford
On the subject of budgeting, a surprisingly high number of first-time buyers neglect to look into getting a pre-approved mortgage. This often leads to potential buyers finding the perfect home only to find they can’t afford it!
It’s quick and easy to get a pre-approved mortgage and you can even get one online. This gives you a great idea of the price range you should be looking at. Often, you’ll be told the maximum you can afford, though it’s wise to stay beneath this figure in order to ensure financial comfort. Be sure to crunch the numbers and see how much you can comfortably afford each month, remembering to account for bills.
Not Shopping Around
It’s always a good idea to shop around for mortgages when you’re looking for your first home. Many buyers stick with what their bank is offering, without considering alternatives. There are a great many mortgage lenders that are worth investigating and you may find far better rates than your bank offers.
Similarly, it’s easy to get fixated on one particular house or neighborhood without considering alternatives. Be sure to spend a lot of time viewing a lot of properties – you never know what you could be missing.
Choosing a Fixer-Upper
Houses in need of repair often carry temptingly low-price tags. However, before you take on a major project, be sure it’s what you really want. There will be stressful months of living in a construction site and the cost of renovating may be far higher than you imagined. Take a good look at what really needs doing and find out how much it will cost and how long it will take.
Not Researching the Neighborhood
Finally, many buyers fall in love with a house and forget to spend time in the neighborhood before moving in. You may find the commute is a nightmare, or that you have neighbors from hell! And there may not be any good schools or other amenities nearby.
Consider spending a few days in the neighborhood in advance to get a feel for the place. Speak to your potential neighbors and make the commute at least once during rush hour to see what you’re letting yourself in for!
When embarking on perhaps the largest financial investment you’ll ever make it pays to take your time and do your research. You don’t have to do it alone – and 9 times out of 10 you’ll gain more from hiring trusted real estate agents, lawyers and inspectors than you could save by skipping their services. With a helping hand and plenty of number crunching and research, your dream home could soon be yours, and with no nasty surprises!
This article is intended for informational purposes only and should not be deemed as legal, financial or investment advice or solicitation of any kind. Before purchasing real estate or insurance, always consult with a licensed attorney, financial advisor, insurance agent and real estate broker.