Buying your first home is a milestone that you won’t soon forget. However, as with anything that you do for the first time, you want to avoid critical mistakes that may come with lack of experience. Understanding and steering clear of these costly pitfalls can make it easier to buy the home that you want. And do so at a price that you can afford now and in the future.
1You Don’t Properly Inspect the Home
Some first-time buyers think that the inspection is just a waste of money or that the home wouldn’t be sold unless it was in good condition. The truth is that an inspection can reveal a mould issue, a leaky roof or a pest infestation. Even the seller may not have been aware of the issue. Learning of these issues now makes it either easier to avoid the house altogether or work with the sellers to work out a solution to help pay for needed repairs.
2You Don’t Set a Budget
It is of utmost importance that you set a budget and stick to it. This is because a lender will approve you for what you qualify for as opposed to what you can afford. Therefore, if you can only afford to repay $100,000 over the next several years, don’t take out a mortgage for double that just because the bank will give it to you.
3You Don’t Account for All Costs of Ownership
There are a lot of costs related to home ownership that you don’t necessarily think of when you rent. For instance, you have to pay to maintain the property both inside and out and make repairs as necessary. You also have to consider that taxes and insurance will be tacked on to the cost of the house. Those costs can add hundreds of dollars to your payment each month. As a result, you could easily find yourself house poor because of it.
4You Didn’t Shop Around for a Loan
One of the biggest mistakes people make is not shopping around for a loan. Whether you are buying your first home or have bought several in your lifetime, it is easy to believe that the rate a bank gives you is the best you can get. However, by shopping around or simply asking for a lower rate, you may be able to save hundreds or thousands a month. Those with good credit or larger down payments are the most likely to get lower than advertised rates by lenders. CAUTION: Don’t submit to credit checks at more than 1 or 2 lenders. Doing so will impact your credit rating. Best way to get some advice in this: ask your real estate agent for a referral!
5You Didn’t Think About Potential Resale Value
When you buy a home, it is critical that you determine how difficult it may be to sell in the future. For instance, if you buy in a part of town where jobs are leaving, it may be hard to find a willing buyer. If you buy at the end of a housing boom, it may be several years before your home begins to appreciate again. This may make it extremely difficult to sell without taking a loss. While all losses are on paper until you sell the home, you don’t want to be stuck making payments without getting equity in the property or being unable to move on when you are ready.
Buying your first home should be a fun and memorable experience. However, make sure it makes financial sense both now and well into the future. Do your research into available loan types. Due diligence can save money and help you enjoy your home for as long as possible.
For a step by step instruction, check out ‘Buying a Home – 6 Important Steps’