First time home buyer? Here are the mistakes that you must avoid as a first time home buyer. It is a very exciting thing when you are buying a home for the first time. But mostly some important indications and signs are often not checked when buying a home.
However, to avoid making the mistake most first time home buyers make, these tips and tricks would help you watch out for certain indications to avoid making these same mistakes.
1. Not knowing the cost of the house you can afford
This is the most common mistake made by first time home buyers. Before purchasing a house, it is advisable to look into your pockets and see how much you have and how much the house you want to buy costs. Sometimes, we tend to look at houses that are beyond our reach however, putting us in a deep financial crisis like requesting for a loan, when we find out we cannot afford it.
Your monthly house mortgage shouldn’t be twenty-eight per cent more than your gross monthly income and if you have debts, that percentage should be lower.
To avoid this mistake, you should use a mortgage affordability calculator to help you know how your home can fit into your finances.
2. Get more than one mortgage quote
This applies to most big purchase as it does to buy a home, a lot of people tend to overlook this when they want to purchase a home but it’s just as important.
You know when you’re trying to buy a car you don’t just want to try one dealer you would want to try out different dealers and pick the right one, the same goes for when you want to purchase a house, you try out different lenders.
According to the Consumer Financial Protection Bureau (CFPB), almost half of first-time homeowners don’t shop around for a mortgage when buying a home. To avoid this mistake, try shopping for about 5 or more mortgage lenders, it would save you a lot of money especially as a first time home buyer.
3. Not saving some money for closing cost, moving expenses and other additional housing expenses
These are the final steps of owning a home, there will always be a need for extra cash when you’re moving into your home, wanting to fix or replace something, additional taxes and so on. It is not advisable to empty your savings on just buying a house, you have to make sure you have extra cash to sort out other expenses.
This mistake happens too often especially with first time home buyers, as they do not think of the extra costs that come after purchasing their home. To avoid this mistake, save some money for closing costs, moving expenses, taxes and some repairs that you might want to do on the house.
Pro tip: If you are not reaching your savings goal, you can check out some money management saving tools to aid you.
4. Skipping home inspection and not asking the right questions during the inspection
The house may look good from the pictures but is it good when you go take a look inside? Real estate agents often show you what you want to see with clear images and bright pictures because they want you to buy. Don’t blame them, it’s just marketing strategy.
For most first time home buyers, they may want to skip home inspection because they believe they have seen all they need to from the images shown and, what’s there to hide? They may ask. But there are numerous benefits to home inspections because you can see it for yourself and notice things even the agent may not have. Are the rooms as spacious as it is in the pictures? Is the kitchen as beautiful as it appears? All these are important things to check for in-home inspections.
Also always ask the right questions. Do not be afraid or scared to ask as many questions as possible—Ask now, or suffer later. Nobody is in a better position to answer your questions than the agent.
Does the house have pests infestation? Does the water run properly? Your inspection should cover tight places like the ceiling. If something is not right about the house do not be afraid to speak up and ask if the problem be looked into.
Pro-tip: it is best to go for house inspections during harsh weather conditions such as rainy or winter season, to know how good and strong the house is.
5. Underestimating how much owning a home costs
It’s one thing to own a home it’s another thing to run a home. It’s not just about mortgage payments, monthly bills begin to pile up and you realize that you have underestimated the cost of running a house.
As much as owning a home can be an asset it can also be a great liability because every month you take out money to continue maintaining it. Bills like electricity bill, water bill, gas bill, sewage bills and the likes keep coming up and you have to keep paying for them if you truly want to enjoy staying in your house.
To avoid this mistake, work with a real estate agent who can give you an insight into how much running a home would cost, so you can estimate the cost and plan towards it.
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6. Making a small down payment
As tempting as it is, making a small down payment would cost you more down the line. Although some loan programs allow you to pay zero or 3.5% down payment which is good especially if you need it urgently but it will cost you a lot down the line.
So it’s advisable to save enough for a down payment and get a smaller mortgage than paying a small down payment and having a larger mortgage. The disadvantage of this is that the number of times it takes to save for a larger a down payment the housing costs are increasing making it difficult to purchase the home you want. The important thing is securing a down payment that is convenient for your monthly income.
According to a survey commissioned by NerdWallet, described how long it took millennial homeowners to save up for a down payment. For the millennial’s that had bought their homes in the last 5 years, it took them 3.75 years to save up for their down payment.
You can calculate how long it’ll take to save for a down payment here
7. Being too picky; waiting for the perfect home
I am going to be honest, there is no such thing as a perfect house. If you’re going to look for a perfect house you might pass on some great houses with great deals and a lovely neighborhood. First time home buyers often want homes with unrealistic qualities and if they find it, it might be too high or below their budget however, leading to complications.
Find a house that is convenient for you and your family to live in. You can always redesign it to your taste and enjoy your life while living there.
8. Not bargaining before buying your first home
Bargaining may seem scary especially as a first time home buyer because you’re not sure you know what you’re doing but it is also very important. Bargaining is a normal business technique that gets you for a price lower than it was stated initially.
Don’t bother about being dismissed because oftentimes that’s our fear. This only shows that you’re serious about buying the house. And if you’re being dismissed for wanting a better price then maybe it isn’t the house for you.
9. Not taking suitable home insurance
Usually, your lender is supposed to tell you the most suitable home insurance plan you can take before finalizing the payments.
And if you’re not satisfied with you can always opt for another home insurance plan but make sure you get the best one.
10. Applying for credits before the sale is final
Before the lender can sell the house to you, you must have a good credit score. Bad credit score equals no house. This is because they want to be sure that you are more than capable of paying your mortgage when necessary. So you mustn’t touch your credits for the periods of applying for a loan or getting the keys to your new home.
They not only check your credits at the beginning of the process but also a week before closing. To avoid this mistake, do not apply for credits until the sale is final.
Extra note: First-time-buyers IN UK will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000.
