Buying your first home is undoubtedly a long and complex process for someone who has little to no experience in the subject. Your average first-time homeowner learns as they go, with the help of their real estate agent and mortgage lender.
But, even so, first-time buyers often make many mistakes along the way that they could have avoided with prior knowledge and preparation.
In today’s article, we’re going to cover 5 of the most common mistakes that first-time homebuyers make when purchasing a home. From the first house you look at up until closing on your first home, we’ll cover common mistakes from each step of the way to give you the knowledge you need to make the best home buying decisions.
1. Shopping for homes preemptively
Once you decide that you’re interested in potentially buying a home in the near future, it’s tempting to hop online and start looking at listings. But, searching for your dream home at this stage is a poor use of your time.
It’s best to use this time to start thinking about the bigger picture. Have you secured financial aspects of owning a home, such as a down payment, a solid credit score, and two years of steady employment history?
You’ll also need to have a clear picture of what you want your life to look like for the next 5-7 years. Will you still want to live in the same area, or will your job lead you elsewhere?
These are all questions to ask yourself before you start house hunting that will inform your process along the way and make your hunt a lot easier.
2. Not knowing your budget
It’s a common mistake for first-time buyers to go into the house hunting process without a clearly mapped budget. You want to make sure that after all of your expenses (mortgage payment, utilities, bills, debt, etc.) that you still have leftover income for savings, retirement, and an emergency fund.
Make a detailed spreadsheet of your expenses and determine how much you can afford each month before you start shopping for mortgages.
3. Borrowing the maximum amount
While it may be tempting to buy the most expensive house you can get approved for, there are a number of reasons this might be a bad idea for you, financially. Stretching your budget each month is putting yourself at risk for not being able to contribute to savings, retirement, and emergency funds.
Furthermore, you may find that the extra square-footage you purchased wasn’t worth having to cut corners in other areas of your life, like hobbies, entertainment, and dining out.
4. Forgetting important expenses
If you’re currently renting an apartment, you might be unaware of some of the lesser-known costs of homeownership. Your chosen lender will provide you with an estimate of the closing costs, which you’ll have to budget for.
However, there are also maintenance, repairs, utilities, and other bills that you’ll have to figure into your monthly budget.
5. Waiving contingencies or giving the benefit of the doubt
While it may seem like an act of goodwill to give the seller the benefit of the doubt when it comes to things like home inspections, it’s usually a bad idea to waive contingencies.
The process of purchasing a home, along with a purchase contract, have been designed to protect both your interests and the seller’s interests. It isn’t selfish to want to know exactly what you’re getting into when making a purchase as significant as a home.