Common First-Time Home Buyer Mistakes

If you do decide that it makes sense for you to consider the investment of owning your own house instead of renting, congratulations!  Home-hunting is exciting, exhausting, and anxiety-provoking.  Unfortunately, many people make mistakes that prevent them from reaching their goal.  Learn from these tips to avoid making costly errors that could put a hold on that "sold" sign.

Not Knowing Your Budget

Not knowing what you can afford is the wrong way to go into home buying.  Even if you can get a mortgage on a place you really should not afford, you will be "house poor" and/or live in great debt for a long time to come.  You might be able to eke out the monthly payment on that big old Victorian, but can you afford to furnish it?  Perhaps that cute little Tudor is more appropriate.

Ensure that you have a complete and accurate budget.  List all your monthly expenses, excluding rent, but including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings, general savings, recreation fees, and so on.  Be comprehensive and do not overlook expenses that only occur once a year, like insurance premiums paid annually or annual vacations, or minor ones that come up more frequently and quietly pile up in the background.

Subtract this total from you take-home pay and you'll know how much you really spend on your new home each month.  When calculating this figure use a mortgage calculator to research current interest rates.  This will give you an estimate of what your mortgage payments will be.

You may even realize that you generally cannot afford the home that you desire and that you need to work on reducing your monthly expenses or increasing your income before you even start looking.

Not Getting A Preapproved Home Loan

Some people are anxious to shop for a house and want to do it quickly before they are financially able to afford it.  Your assessment of what you think you can afford and the amount the bank is willing to lend you may not agree, especially if you have poor credit or unstable income.  Ensure pre-approval for a loan before placing an offer.  If you do not, you'll be wasting the seller's time, the agent's time and your own time if you enter into a contract and then discover the bank will not lend you what you need, or that it is only willing to give you a mortgage that you cannot or will not accept.

Disregarding Hidden Costs

This is another common mistake that many first-time homebuyers make.  If you neglect to prepare for hidden fees, you might be in for a surprise.  Closing costs are a good example of hidden fees, as they usually include several fees that cover final housekeeping matters.  Once you are a homeowner, you will have additional expenses on top of your monthly payment.  You will be responsible for paying property taxes, insuring your home against disasters, and making whatever repairs the house needs.

If you are interested in purchasing a condo, you will have to pay maintenance costs monthly regardless of whether anything needs fixing because you will be part of a homeowner's association, which collects dues monthly from the owners of each unit.  Before signing the homebuyer's agreement, it would be wise on your part to ferret out all hidden fees and incorporate them into your budget.

Not Knowing Your Credit Score

If you apply for a mortgage loan without checking your credit score, you could end up paying a lot more than you expected.  It is best to perform a credit check beforehand.  Take special note of the information regarding the importance of good credit in applying for a home loan and take all necessary steps to repair credit problems prior to home shopping.

Disregarding Local Housing Market Trends

Like other financial markets, the housing market fluctuates over time.  Sometimes it favors buyers, and sometimes it favors sellers.  This can change over a three-to-six month period.  Several factors affect housing marketing trends, including the ratio between supply and demand, interest rates, and the overall condition of the economy.

It is important that you consider how the housing market changes in your ideal location, as home prices vary from one location to another.  Stay alert to comparable sales in the area.  This information can be important when making offers, allowing you to calibrate your proposal to better suit the market and your budget.

Not Being Represented By A Buyer's Agent

You can browse without an agent, but once you are considering seriously looking at a house, engage a real estate agent.  Do not rely on the seller's agent to represent you.  The listing agent is the seller's representative and has the seller's interests in mind.  It is pointlessly risky to negotiate conditions and sale price without proper professional representation on your side.

Not Conducting A Professional Home Inspection

It can be a costly mistake to rely on the seller to inform you about house problems.  Prior to closing on the sale, you need to know the property's specific condition.  Any sales agreement must be conditional on the satisfactory results of a complete and comprehensive home inspection by a reputable and qualified home inspector.  This will disclose structural and systems issues or weaknesses that can run the gamut from plumbing, gas, and electrical problems to full-blown structural integrity problems in roofing, walls or foundation.

Compromising On Your Needs

While compromises in meeting your dream-home desires are necessary in a first-time purchase, do not compromise on your needs.  You can do without the living room fireplace or swimming pool; however, do not accept a two-bedroom home when you are planning to have children and will need three bedrooms.  On the other hand, use your vision.  Even if you hate the wall colors, but cannot afford to renovate immediately, it might be worth it to live with them temporarily in exchange for a house you can afford.  If the meets your needs in the location and size, do not let lesser physical imperfections overpower your perspective.

Relying On Online Services Only

Now that many real estate transaction services are obtainable at the click of a mouse, many people have become too dependent on them.  While is is true that loans can be obtained online, and houses can be bought as well, failure to establish personal touch with lenders or real estate professionals could present costly misunderstandings or put you at a bargaining disadvantage.  It might feel more convenient and less stressful to go through as much of the process as possible online, but you may well find you have simply saved up far more stress and inconvenience for later.  In the end, it is better to simply take the plunge at the outset and handle things in person when you can.

Avoiding these mistakes can help you make the right choices when it comes to finding a home you and your family can take pride in.