Home buying is hard y’all. We actually lived in our home for a few years before taking out an official mortgage, thanks to amazing in-laws that helped a young couple get a good, solid, start over 10 years ago. Even already living in the home and knowing we had already made updates, etc., we still had to do all the things, including inspections, trivial repairs, etc. before being approved. (I say “trivial” repairs because it was about a 2′ section of wall on our back porch that we needed to slap a new coat of white paint on – that’s what held up closing – a 5 minute project. It’s crazy some of the things they come up with depending on the lender. Now I can only imaging how much more goes into purchasing property that is completely new. I did learn a few things through the process though – that I think are worth sharing no matter how you end up buying your first home.
Finally, you are ready to buy your own home – for the very first time. The excitement is understandable and shared by so many people who have been in your position before. However, in the moment of excitement, you are capable of making costly but avoidable mistakes – mistakes that can make home buying and mortgage payment a nightmare. So, while you remain excited, here are some home-buying mistakes you should try to avoid.
Don’t buy a house when you are in debt
Unless you are fortunate enough to have old money (in which case you don’t need my tips), or you’ve become independently wealthy somehow. A home is going to be your primary source of debt for the foreseeable future. Can you run a marathon when you have heavyweights chained to both of your ankles? That is how it can feel like when you try to buy a house when you are in debt. Not only will it take you an eternity to reach the finish line, but you will probably be worse off than when you started. So, if you have debts from student loans, credit cards, car loans, etc. then it is best to pay them off before deciding to buy a house. You don’t want to be piling up debt.
Don’t buy a house you cannot afford
I get it boo – you like the shiny, pretty, things. I’ll admit, glitter is my favorite color and I love that new everything smell also. This isn’t the newest pair of overpriced jeans though. You can’t return it if you have buyer’s remorse. But surprisingly, this is one buying mistake a majority of first-time home-buyers make. Sometimes buyers are struck by a house that meets all their fancy ideas about what the perfect house is, even when they are fully aware that the house falls way above their comfort zone when it comes to payment. You do not want your new home to become a financial burden on you so stick to your financial plan. And even if you get approved for a loan rate higher than what you planned for, do not be tempted into opting for a more fancy house. Anyway, some of the fun of a new place is making it your own so the bigger one, may not be better in the long run.
Save enough money for a down payment
Most people find this out too late – you need to save enough money for a down payment. If you’re applying for a mortgage, one of the worst things you could ever do is not saving enough money to be used as the initial payment. For most mortgage providers, any amount that falls short of 10% of the value of the property will not be enough. And although there are some programs insured by the government that allow you to receive a loan with little no down payment at all, such loans usually come with very high-interest rates and fees. To be on the safer side, always save a minimum of 20% of the value of the building for a down payment. More is always better, but more is not always practical so that is just a guideline as well. Make sure you are working with a loan officer that you trust and will show you all of your financing options with a variety of down payment scenarios. They’re working for you so never be afraid to ask!
Do not forget about moving expenses and closing costs
Aside from your money for a down payment, you should also ensure that you have enough saved up for the many extra expenses that will come your way. Such expenses include legal and insurance fees, property taxes, home inspection fees, appraisal fees, and so on. Such extra expenses can make up about 4 to 5% of the total value of the building. Another expense that some people seem to forget about has to do with moving. Not including all these expenses in one’s calculation could lead to one ‘stealing’ money from any emergency fund available. Make sure you consider these potential expenses. Some can be negotiated in your loan, some cannot, so be sure you’re also prepared for those costs as they arise.
Without getting a pre-approval letter before you start shopping for your house, you will risk losing the house you love to a competitor. It helps you know what price range you can buy in, and also lets sellers know that any offers you make are legitimate and a bank is willing to work with you. This is because most home sellers prefer to sell to buyers with a reliable financial standing. And getting a pre-approval letter will indicate to the seller that not only are you a serious buyer, but that processing you for the house will be fast, smooth, and hustle-free. So, if you want to be ahead of other competitors for that dream house, then don’t forget to get pre-approved first.
Picking the ‘wrong’ type of mortgage
Who knew there were so many types of mortgages. I knew fixed and variable rate, but to my surprise, that’s just the tip of the iceberg. Mortgages actually come in several different types. Most of them (especially those sponsored by the government) have been designed to make it possible to get a house loan without needing to put down any down payment. Unfortunately, most of these mortgages come with very high-interest rates that will make paying back difficult and very uncomfortable. So, don’t make that mistake – take the time to pick out the right mortgage for yourself. A mortgage broker such as Altrua Financial is noted for offering the best mortgage rates that offer a lot of ease and payment flexibility.
Cosigning your mortgage
One huge mistake that most first-time home-buyers make is getting other people to cosign on their mortgage. Why is this a huge mistake? Getting someone to cosign on a mortgage that you cannot afford will lead you into some serious financial stress in the future – as well as the one who did the cosigning. If you do not have the financial freedom to purchase a house, don’t purchase one. You can postpone it until you are ready. You can lose friends and family and there are really only a couple of scenarios that I would personally feel asking someone to co-sign on something this substantial, would be a good decision for either party.
Not using a trusted real estate agent
Yes you can buy and sell homes and property privately, without the assistance of an outside agent. There are a lot of people walking around disguised as real estate agents but may not necessarily have the expertise. Therefore, it is advisable to only hire the services of a professional and trusted real estate agent. A professional realtor knows all the information you will need about the location of the building and prevent you from making unnecessary payments. They will also advise you on the real value of the house and save you from overpaying for a building. In order to know you’re hiring the services of a trusted realtor, interview the person to find out about their track record. Ensure that they understand the market and the area very well, and also make sure that they are full-time realtors. Interview a couple of real estate agents. Find out if they are dual agents (working for buyer & seller) or if they’re working just for you as the buyer. Find a good personality fit because you’ll be talking with the person regularly for a while as you go through the home buying process.
Stressing over carpet condition and wall color
Remember all those “trivial” repairs I mentioned. You may also be faced with a dislike of interior design when finding a new home. Sometimes bad decorating on behalf of the seller, makes it harder for the potential buyer to see the diamond in the rough. One can easily pass on a potentially perfect house by stressing over minor factors such as the paint color and condition of the carpet. These are things you can easily fix, and in most cases, planned anyway as you begin to make your new house a home. If you can learn to ignore certain cosmetic factors, you can score yourself quite a deal. Instead, concentrate on things that are not too easy to repair, such as roof condition, moisture issues, structural and foundational problems, location, and whether the house is a good fit for your family.