Like any life decision or major purchase, buying your first home requires careful thought, planning and preparation. Not everyone, however, takes the time and does the necessary research. Following is a list of some of the common mistakes first-time buyers make, compiled from a variety of sources, and suggestions on how to avoid them.
Overbuying: Real estate experts cite this as the most common mistake for first-timers – buying more home than they should or can afford. Make sure you have an excellent understanding of all the costs of homeownership involved, as well as a handle on your other expenses, from credit cards to personal expenses to car payments or other commitments.
Emotion over reason: buying your first home is an emotional moment and one you should be excited about, but you must keep your head. Don’t let your ‘love’ for a prospective home cause you to become overexcited and lose your common sense. You may end up buying the wrong house or paying too much for it.
Settling: Sort of the opposite of overbuying, don’t ‘settle’ for a house when there are likely better options available. Make sure you do your research on your finances, the neighborhood, location and specifics of the home, so you know you’re making an informed choice.
Not getting pre-approved for a mortgage: Getting pre-approved provides peace of mind in that you know what you can afford, which gives you confidence when it comes time to making an offer and negotiating.
Not knowing your mortgage options: While you may feel most comfortable going straight to your friendly neighborhood bank for a mortgage, this may not be where you get your best deal. Finding the right mortgage can save – or cost – you thousands of dollars, so be sure to take the time to examine all options – from banks to brokers, and all the various products. You can use Which Mortgage's compare home loans page to learn more about your options.
Choosing the wrong location: While most first-time buyers tend to stay in their homes for five to seven years, in making your selection you still need to think at least a little about the factors that affect resale – either positively or negatively. Research the neighborhood and pay attention to marketable details of the house, such as proximity to transportation, shopping, schools, parks, planned developments and even local crime statistics.
Scrimping on the inspection process: The cost of a professional inspection – usually less than $500 – is a small price to pay for the peace of mind of knowing your prospective property is free of major defects. In today’s challenging market, more vendors are contracting a pre-listing inspection as feature to help sell the home, since it can identify repairs either party can make easily or negotiate into the selling price. Even so, unless the report is recent and from a reputable firm, you may want to contract your own independent inspection as well.
Not reviewing the purchase contract closely: Real estate purchase contracts long and detailed, but it’s necessary to review them carefully, both on your own and with your lawyer. Pay attention to all clauses, covering everything from inclusions in the sale to closing dates. And since many first-time buyers purchase condominiums, this is especially true with condos since these agreements are typically even longer and more detailed, covering everything from maintenance fees to temporary occupancy fees on new builds.
Using the wrong realtor: For first-time buyers especially, the services of a qualified and experienced real estate agent are invaluable. But not all realtors are created equal. In the hot markets over the last several years, more people entered the profession, trying to cash in on booming sales and commissions. But now, in a more challenging market, some of these newcomers are becoming part-timers or leaving the business entirely. In theory, at least, the best and most experienced realtors will be left standing. Be it through referrals or your own research, take the time to find a good agent – one who wants and truly deserves your business.
Making an offer prematurely: This often results from buyers getting too attached to a home too early, without looking at other options, letting their emotions get the best of them and wanting to snap it up before someone else does. Be sure you take the time to review the information on market value for similar homes in the neighborhood, to ensure you don’t overpay.
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