You’ve made a big decision—you’ve decided to buy your first house. Most likely, this is the biggest investment you’ve made in your life so far. The home buying process can be complex, and a mistake along the way can disrupt your plans for the future. To help you start out on the right track, we’ve collected 7 first time home buyer mistakes you should look out for. Be mindful of these home buying pitfalls and you can enter the market with the knowledge you need to get your dream home.
7 First Time Home Buyer Mistakes to Look Out For
1. Finding the Wrong Realtor
Your realtor should have your best interests at heart, and they should be easy to work with. However, you also want to work with a knowledgeable professional, not necessarily the first person you meet. Working with a friend or acquaintance without much experience is one of the most common first time home buyer mistakes. Be sure that your Realtor has the resources to help you find your dream home, and the expertise to help you move fast. To find the right Realtor, don’t be afraid to interview several candidates, and ask the right questions.
Consider the following questions for your potential Realtor:
- What tools do you use to narrow down your search?
- If a house goes on the market, how soon can I see it?
- How do you communicate with your clients?
- How many homes have you closed on?
- How many years of experience do you have?
Everything you need to know about finding and purchasing your first home
2. Finding the Wrong Lender
Many first time home buyers work with the lender that they’ve worked with for years, without looking into other options. This seems like a sound instinct, but it can leave money on the table. Your usual bank might not be the lender offering the best loan terms. Shop around and see if other lenders will offer better terms.
Another common first time home buyer mistake is choosing a disreputable lender. Finding a loan with a low interest rate can save your thousands in the long run, but be wary of a loan that sounds too good to be true. Be sure you know exactly what your loan specifies, including how much exactly you will be paying each month. If you are interested in a fixed rate loan, be sure that your contract specifies this. If you are interested in an adjustable rate mortgage, be sure you know exactly when the monthly payment increases, and by how much. If your loan officer can’t or won’t answer these questions, it’s a red flag.
3. Not Acting Fast
The real estate market across America is a seller’s market, and it is currently very competitive. If you find a house that meets your criteria, tour it as soon as you can. If the tour goes well, don’t wait. Contact your Realtor about making an offer as soon as you come to a decision. While a certain amount of apprehension is normal about a big purchase, it shouldn’t stop you from making an offer. If you’re repeatedly dragging your feet, ask yourself what you’re really uncertain about.
4. Not Budgeting Accurately
It’s important to budget properly when making a big investment like a home. Keep in mind that your lender might approve you for a larger loan than you really want to take on. Add up all of your expenses and debts, and make a realistic approximation of how much you can comfortably spend each month. If you force yourself to pinch pennies to afford your home, or you count on a raise that might not happen, you’re setting yourself up for problems down the road.
5. Not Getting Pre-Approved
When you make an offer, you want it to be taken seriously by the home sellers. If you aren’t pre-approved for a home loan, the home sellers may think your offer is unreliable. This is a common first time home buyer mistake for buyers that are overwhelmed by the mortgage process. Take this one step at a time, and get pre-approval first.. This way, home sellers will take your offer seriously when you find the right home.
6. Not Narrowing Down the Market
When you first start looking for a home, it’s easy to be overwhelmed by the sheer number of properties available. With all of these properties, you might find yourself overcome with decision paralysis; there are too many options to feel good about any selection. It’s important to narrow down your list and know what you’re looking for.
A common first time home buying mistake is cast too wide a net. Many first time home buyers fear that they’ll miss out on a great opportunity if they make their home search too narrow. However, the opposite can easily happen; with too wide of a net, you’ll lose your perfect property in a sea of imperfect ones.
Narrow your search with the following criteria to start with:
- Your budget: You should know approximately how much of a downpayment you can afford and your loan terms. From this, you can narrow your home search by price.
- Your neighborhood: Consider your workplace as well as your lifestyle and your future. What do you want to be close to? Do these neighborhoods have the type of home that you’re looking for, and in your price range?
- Bedrooms and bathrooms: Again, consider your current lifestyle and your future one. For example, if you don’t want children, you might need a lot of extra bedrooms.
- Home improvements: It’s tempting to take on a fixer-upper because it’s a great deal and will make a great investment. Though this can be true, a fixer-upper also requires a lot of expertise, time, and energy. Make a list of home improvements you’re not willing to make, so you know where to draw the line.
7. Not Pricing Correctly
Once you’ve narrowed your market, it’s important to price your home appropriately. Your neighborhood, square footage, yard size, amenities, and other considerations will all affect the value of your home. Make sure that this makes sense with your budget. If it’s difficult to find the home you want within your budget, ask yourself if you’ve priced your home correctly. You might look at recently sold properties to see if you’re on the right track.
Keep these common first time home buyer mistakes in mind and you can avoid some of the biggest pitfalls in your home search. Take your home search one step at a time and, once you find the right home, don't hesitate. Working with an expert, you can be confident in your decision and you can feel good about the home buying process.
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