Buying Your First Home? Here are Five Mistakes to Avoid
Buying a first home can be intimidating. There are numerous questions to ask, countless factors to consider, and endless options for size, area, amenities, school districts, and more.
Mistakes among first time buyers are common. Here are a few of the common mistakes we see, as well as a few tips to help you avoid problems and find the right mortgage for an outstanding home!
5 Things to Avoid When Buying Your First Home
Looking for House Before Applying for Loan
Most home purchases follow a very specific step-by-step process. The first step, after setting a budget, should be to get pre-approved or pre-qualified for a mortgage. Unfortunately, many people skip this step and go straight to looking for a home.
This presents problems when it comes time to view homes. Sellers and real estate agents want to work with people who are likely to buy a home and can afford the purchase; getting pre-approved acts like a verification, telling the sellers that you are (most likely) able to make the purchase.
Pro Tip: Before contacting a real estate agent, get pre-approved or pre-qualified for a mortgage
Taking Out New Debt
One of the worst things you can do when buying your first home, for both your personal finances and your mortgage application, is to take out new debt. This is an all-to-common problem that disrupts your loan approval and can create havoc for your personal budget.
When preparing to purchase a home, especially your first home, it’s easy to get excited. (In fact, you should be excited!) But unfortunately many buyers rush out and purchase new furniture, new appliances, and new technologies for their home; many of these purchases are made with credit, which increases your debt load.
This debt load not only creates a tighter budget, it can also disrupt your mortgage approval. When lenders see new debt, they may get worried that you have overextended and decide to either pull your mortgage or increase your interest rate. The first leaves you with no home (yet) and lots of new (and expensive) items; the second makes your homeownership more expensive.
Pro Tip: Avoid new debt to ensure a seamless, affordable mortgage.
Buying a House You Don’t Want, Don’t Need
One of the fastest ways to lose money is to sell a home immediately or soon after making the purchases. With closing costs, realtor fees, listing expenses, and other costs that come from buying and selling a home, you can lose as much as 5% when you sell. Don’t let that happen to you; buy a house you want, one that will make you happy for years to come.
For example, if you have a growing family and expect more children in the near future, you probably should purchase a two-bedroom home. If you love living near a city’s downtown area, you probably shouldn’t purchase a house on the outskirts of town.
Buying a home that is too small is common, but it’s also important that you don’t buy a house that is too big. When you meet with a lender, there’s a good chance that you’ll be approved for a mortgage that is larger than you need; just because you can take out a larger loan doesn’t mean you should. Instead of thinking about the absolute highest price you can afford, set a target price and stick with that number.
Pro Tip: Think about what will make you happy now and in the future.
Thinking of Home Solely as an Asset
It’s a cliche, but, like most cliches, it’s true: your home is likely the largest single purchase you will purchase in a lifetime. Therefore, it’s important to think of the home as an investment, one that will not only hold its value but also gain in value.
But many people get caught in the trap of thinking about the home solely as an asset. This type of thinking can lead you to justify purchasing more than you need (it’s an asset, so why not take out another $200,000?) and can cause you to purchase a home that won’t make you happy.
Asset-focused thinking also leads people to attempt to “time the market,” and make a purchase at a point when prices are low, interest in ideal, and values are set to climb. Treating a home purchase like a stock investment often result in bad decision making.
Yes, it is a financial investment, but it’s also your home. Personal preferences and desires, regardless of cold-hard numbers, should also be considered. When the right home comes up and you are ready to buy, make the purchase.
Pro Tip: Prioritize your happiness as much or more than cold, hard, asset-based thinking and ignore the urge to “time the market” perfectly.
Work with People Who Don’t Seem to Care
If you feel, at any point during the mortgage or real estate process, that the person you are working with does not care about your interests, you don’t have to keep working with them. Too many buyers get locked into a relationship with a specific lending agent or real estate professional and, for whatever reason, continue working with that person regardless of service quality.
If the person does not return your emails, does not answer your calls, or can’t (or won’t) answer your questions, it’s probably time to move on. As we said, the home is an important purchase and a major investment, so you simply can’t afford to work with people who don’t have your best interest in mind.
Pro Tip: Go with your gut and work with people who show they care.
Buying First Home? Get the Service You Deserve for the Mortgage You Need
If you have any questions about the mortgage or purchase process, feel free to contact out team at any time. Whether or not you get a mortgage through us, we’ll be proud to answer all of your questions so you can make the right choice for your future.
From first-time buyers to seasoned property investors, we can help you make a purchase that fits your specific needs!