3 Rookie Mistakes First-Time Home Buyers Need to Avoid
by Christy Bieber | Published on Aug. 20, 2021
You could end up regretting your purchase if you make these first-time home buyer mistakes.
Buying a new home for the first time is really exciting. But it can also be a complicated transaction, as well as an expensive one.
It's important to make smart choices during the entire process so the purchase of a first home ends up being a good financial decision that helps you set the stage for building equity and growing your wealth.
And part of that means avoiding common home-buying mistakes. While it's natural to make errors during the home-buying process, knowing about these three common mistakes in advance can help you avoid problems during your purchase and as you work on paying down your home loan.
1. Not being prepared for closing costs
Closing costs can come as a huge surprise to home buyers, and with good reason. The transaction fees and expenses associated with buying a house are really expensive, often coming in at between 2% and 5% of the value of the home. If you're a first-time home buyer, it could be shocking to end up owing thousands of dollars to close on your transaction and take ownership.
Unfortunately, if you don't have the money for closing costs, this could be a serious issue. You could end up having to borrow more money -- if your mortgage lender allows it. That would make your loan more expensive over time. Or you could end up scrambling to come up with the cash to avoid derailing your home purchase.
To avoid this error, make sure you ask your lender up front what your closing costs will be. You should be provided with an estimate within a few days of applying for a mortgage that shows you what you can expect the charges to be. Make sure you have the money available, or start saving ASAP if you don't.
2. Falling in love with a house
Falling in love with a house can be a good thing -- but only if you keep a level head. If you decide that a home is a "perfect" one, then you may be more likely to overpay for it or end up ignoring serious and costly flaws that could become a problem down the line.
Remember, no matter how nice a house seems or how perfect it looks on the surface, it's only the right house if:
- You're paying a reasonable amount for it
- It is within your price range
- It's in good physical condition (or priced for a remodel if it isn't)
You can compare market values of properties and should carefully consider whether the down payment and mortgage costs are within your budget before you decide to make an offer on a house -- no matter how much you love it after making a visit.
3. Not including the right contingencies in your offer
When you make an offer on a house, you probably don't want to 100% commit to buying without including a few conditions on the sale. Otherwise, you could end up with a home that has major problems, or could lose your deposit if it turns out you can't follow through with the purchase.
You can include conditions on the sale by making your offer contingent on certain things happening. For example, you should likely make your offer contingent on a satisfactory home inspection. Doing that ensures that you can get a professional to check out the home's condition and point out any problems before you're committed to buying it.
You may also want to make the offer contingent on the home appraising for at least what you pay for it so you don't end up paying more than market value. And you should consider including a financing contingency as well to make sure you can get a mortgage before you're committed to buy.
By maintaining perspective during the purchasing process, including the right contingencies, and preparing for closing expenses in advance, you can maximize the chances that the purchase of your new home isn't something you'll come to regret.
About the Author
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