5 Expensive First-Time Buyer Mistakes
You’re planning to buy your first house? How exciting! Just make sure you avoid these expensive mistakes, so your new home will measure up to your dreams.
Mistake #1. Borrowing too much money.
If you are used to a $750/month rent payment, but are considering an $1,800/month mortgage, your budget is going to feel substantially tighter. Throw in a couple unexpected events, like a car that needs to be replaced, the loss of a job or the arrival of a child, and you could end up in financial crisis.
Just because you “qualify” for a larger loan doesn’t mean you should take on the maximum debt possible.
Mistake #2. Failure to make home ownership a part of your overall financial plan.
Before you begin considering home ownership, you should have saved up money for a down payment, addressed any issues on your credit report, and secured pre-approval for a mortgage.
You should also meet with a financial counselor to determine if home ownership is the right step for you. For instance, if you plan to change jobs in the next couple years, you may want to continue renting a bit longer before buying your first home.
Mistake #3. Buying a fixer-upper without the skills or experience to renovate it.
Buying a low-cost home that “needs a little TLC” may be a great investment. It may also be a money pit. If you don’t have the know-how to give your “ugly duckling” the attention it needs, be sure to get expert opinions on the condition of the house and estimates on the cost to hire the work done before making a purchase decision.
Consider all the pros and cons of fixer-uppers before you leap.
Mistake #4. Inclinations to be “penny wise and pound foolish.”
If you are buying a house, be sure you are protecting yourself financially. Spending $500-700 now may prevent a $20,000+ mistake in your near future. Spring for the inspection.
It’s also important to shop for mortgages. Interest rates and fees can and do vary from lender to lender. Take a “big picture” perspective and compare costs side-by-side, both now and down the road.
A shorter-term mortgage could save you tens of thousands of dollars over the life of the loan. If closing fees are included in your loan, this will also drive up your total costs. Shop around, compare prices and find the best mortgage deal.
Mistake #5. Purchasing through the listing agent.
Imagine you’ve spotted the perfect home for sale. It may seem logical to contact the agent whose name appears on the listing. In fact, that’s a mistake, particularly for inexperienced buyers who really need an advocate to support them in the biggest purchase of their lives.
The listing agent is duty-bound to represent the interests of the seller, not the buyer. The best way to ensure you financial interests are represented and your needs are met is to choose an Accredited Buyer’s Representative (ABR®).
Buyer’s agents are typically paid through a commission split with the selling agent, so there are usually no out-of-pocket costs when an agent works for you and you alone. With expert help from a qualified real estate professional, you can avoid many of the potential pitfalls of buying your first home.