10 Common Mistakes First-Time Homebuyers Make
10 Common Mistakes First-Time Homebuyers Make
Avoid making these mistakes as a first-time homebuyer
Buying a home is a major investment. For first-time homebuyers, the experience can be as exciting as it is stressful. To avoid making hasty decisions that can lead to buyer's remorse, it helps to approach the situation with a level head. Here are 10 blunders that buyers make with their first property and how to avoid them.
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1. Starting a search without a mortgage preapproval
If you’re just thinking about the prospect of homeownership, mortgage prequalification is fine because you’ll find out what you might be able to borrow. But if you’re going to start a home search in earnest, you’ll need a mortgage pre-approval to determine what you can borrow.
This way, you’ll be able to search for homes that you can afford. If you find a house you love and want to make an offer, a mortgage pre-approval is a clear sign to the seller that you’ve got your finances in order.
ALSO READ: 3 Things You Need to Know About Mortgage Pre-Approval
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2. Not applying with multiple lenders
Understandably, first-time homeowners are tempted to dive right into the mortgage application process with the first lender who responds with a quote. But just as you would shop around for the best price for other products or services, you're going to want to get a few quotes for your mortgage, including the percentage rate and loan terms.
A fraction of a percentage point seems small, but it could add up to big savings over the course of your loan. You'll also want to see who offers the quickest customer service, which can save you time during the mortgage application process.
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3. Overextending your budget
Once you've been preapproved for a certain loan amount, that doesn't necessarily mean that should automatically be your home budget. Remember, it's not just your mortgage you have to contend with each month -- you have to factor in all your costs, including home insurance, property taxes, and energy bills.
Take a look at your full financial picture to better understand what you can comfortably afford to pay each month.
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4. Depleting your savings for a down payment
Yes, putting 20% down on a home will lower your monthly mortgage and help you avoid private mortgage insurance (PMI), but it's not a good enough reason to clear out your savings.
If making a smaller down payment means you'll be able to maintain an emergency fund, do it. You'll be glad to have the extra cash on hand if you discover repairs that must be made after moving into your new home.
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5. Doing anything to negatively impact your credit
While you're getting your ducks in a row to buy a home is not the time to open or close a credit card account, buy a car, or do anything else that will result in your credit score taking a hit. Keep your finances on an even keel until the day you close on your new home; otherwise, you'll risk getting final approval for your mortgage.
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6. Not securing gift money ahead of time
Has a family member or friend promised you a sum of money to put toward your down payment? Better get it in writing well before you put an offer on a home. You can apply gift money toward the purchase of property, but your lender will need to confirm it with a signed gift letter and proof of the bank deposit or transfer.
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7. Prioritizing the property over the location
Many first-timer homebuyers fall in love with a house without considering the surrounding area. A dream home can easily become a nightmare if you find that the location doesn't match your needs or desires. Remember, you can always make improvements to the home, but you're stuck with where it's situated.
ALSO READ: Buying a Home in These Locations Could Raise Your Insurance Costs
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8. Getting caught up with cosmetic fixes
Walls can be repainted. Light fixtures can be replaced. Rather than focusing on aesthetics, you want to see whether a home has "good bones," meaning the structure itself is sound. It's fine if you want to make changes to put your own stamp on the space, but you'd probably rather not have to deal with major fixes like a sagging roof or cracked foundation.
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9. Skipping the home inspection
Speaking of "good bones," the only way to determine whether the house has any major problems is with an inspection. Many homebuyers choose to waive the inspection contingency to make their offer stand out to the buyer.
It's a risky move, though. Unless you have a healthy savings that can take on any issues you discover with the home after moving in, it's better to keep the inspection as part of the process. If you do find problems with the home, you still have time to walk away from the deal.
ALSO READ: Here's Why You Should Always Get a Home Inspection
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10. Letting emotions get in the way
The homebuying process can be an emotional roller coaster ride. It's thrilling to have your offer accepted on a home. But in a hot seller's market like the one we're in now, it's very possible to get your hopes up for a home that, ultimately, will go to another buyer.
Try not to let any disappointment dissuade you from continuing your home search, and don't let your excitement or eagerness get in the way of making level-headed decisions.
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Be smart about buying your first home
The path to homeownership isn't always a smooth one. By learning more about the homebuying process, you'll know what to anticipate and will be able to avoid many of the common mistakes first-time homebuyers make.
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