Hey, we all make mistakes…….but often times this creates opportunities to learn from others. We’ve put together a list of some of the most common mistakes first time home buyers in order to help you avoid these same issues and ultimately have a more pleasant home buying experience.
1. Not understanding multiple offer situations
A multiple offer situation is when you are competing with another buyer for the same property. This occurs when two or more offers come in at the same time and usually the seller will send notice for the prospective buyers to bring their highest and best offer. Often times first time home buyers don’t understand how aggressive the bidding can get when this happens. This can lead them to submit less competitive offers and ultimately lose out on the home. Sometimes it takes missing out on a few properties before they have a clear understanding of what it takes to win a home in a hot seller’s market. Understanding the market and having a game plan for a winning offer will help you avoid a frustrating home search experience.
2. Letting emotions take over
There’s no denying that buying a home is an emotional experience. However, many times first-time home buyers get so caught up in the excitement of a home that they sometimes overlook glaring issues of a property. Stay grounded and make sure it truly is a good fit for you and your family. The negotiation process can also be very emotional for both sides, but it’s important to remember that your ultimate goal is to purchase the home and find a win-win deal for both parties.
3. Not understanding what you can truly afford
Many people began their home search without knowing what they are actually approved for. Besides running the risk of not being able to afford any of the homes that you’ve looked at, it also creates unrealistic expectations of the homes that DO fall in your price range. Now you are comparing what you can afford to the higher priced homes that you’ve already fallen in love with, which leads us to our next point……
4. Not getting pre-qualified before starting your home search
We’ve just discussed one reason why it’s important to get pre-approved and understand how much you can afford, but there’s also another reason why obtaining a pre-approval is so important. In a hot market where homes are flying off the shelf and are in constant multiple offer situations, you want to be able to act quickly when you find the home of your dreams. If you wait until you’re ready to put a contract on a home, then there’s a good chance you could miss out on that property.
5. Failing to consider additional expenses
If you’ve never purchased a home before then you may not be aware of the costs besides the actual mortgage loan for the property. Be sure to take into account all closing costs, down payment amount, earnest money, moving expenses and setting up utilities.
6. Being too picky
Many first-time home buyers think they are purchasing a home that they will live in for 20 years, which may be the case for a few, but the reality is that most first-time home buyers will upgrade to a larger home or move to a different location altogether within a couple years. It’s perfectly normal to want the perfect home that you can see yourself living in forever, but it might be best to write down just a couple of items that you are unwilling to compromise on. This will help make your home selection a little less stressful.
7. Not seeing past cosmetic issues
Being able to overlook minor cosmetic issues could actually save you $1,000’s if the home is priced to condition. We’ve seen homes completely transformed with fresh paint, new carpet, landscaping and some good old fashioned elbow grease. Of course you never want to overlook major repairs, but these can be negotiated as well. If you come across a cluttered home with pink walls and dead grass, try to look past these eye sores and see if there is true potential for the home.
8. Not doing a home inspection
This might be one of the most common and biggest mistakes we see first-time home buyers make (especially with new construction). Many people try to avoid paying for a home inspection in order to save a few hundred dollars. Every now and then this strategy may work, but there’s also a chance that because you decided not to do a home inspection, you may have missed items that need major repairs, in the end costing you $1,000’s. Unless you’re a cash buyer buying a property as-is, we would always advise spending the extra money on this.
9. Buying big ticket items before closing
You’re finally under contract on the home of your dreams and thinking ahead you decide to replace the old refrigerator in the house with a brand new stainless steel one or maybe buy new furniture. So you go ahead and use your credit card to buy it a week before closing. Then you get the news….You are no longer approved for the loan on your home. Now unable to qualify for the loan because your debt has increased, the contract falls through and possibly leaves you in breach of contract for failure to execute in good faith. While this is an extreme example, it is possible and has happened before. This is why you will probably hear multiple times from your lender and Realtor not to make any large purchases before you close on your home.
10. Assuming your credit is too low to qualify
Many people are afraid to even apply for a home loan because they think their credit is too low. This is often a mistake because there are programs out there that will often accept credit scores as low as 580. Also, if your credit score is borderline, there might just be a few minor things you need to do to repair it and qualify.
11. Not comparing lenders
Another big mistake is just talking to one lender. We always suggest speaking to at least three different lenders so that you can compare not only the interest rates, but also each of the lender’s fees associated with the loan. Do this and you can rest assured that you are getting solid lending terms.
12. Not searching for first-time home buyer programs
Do you like paying less money? I know I do. Unfortunately, many first-time home buyers are missing out on tax credits, down payment assistance and lowered rates simply because they aren’t aware that these are available. Do yourself a favor and research the many programs available to you.
13. Working directly with the listing agent
Every now and then we see buyers who try to work directly with the seller or listing agent without having an agent represent them. This is more common with new construction homes when the buyer walks into a model home and begins working with the agent on site. The problem is that the agent in the model home works for the seller (builder) and has a fiduciary duty to look out for their best interests…….NOT yours. When there are contract disputes or someone is not upholding their end of the deal, you need someone with experience who will fight for you…..not the other way around.
14. Putting a contract on a home after just one visit
There’s only one time that I would suggest putting a contract on a home after only seeing it once and that is if you are in a hot market where a multiple offer situation is highly likely. However, if you do have the luxury of time on your side we always suggest visiting the property a second time and at different time of the day. You might notice things about the house or neighborhood that you didn’t catch the first time.
15. Not understanding the type of market
Understandably first-time home buyers are often looking for the best deal they can get. However, first you must understand the type of real estate market that your local area is in as great deals are not always plentiful. A buyer’s market is exactly what it sounds like……there is usually a surplus of home inventory for the amount of active homebuyers. This can result in some fantastic deals for buyers. On the flip-side is a seller’s market, where home inventory is tight and it is common to see multiple offer situations, which can drive up the price of homes even higher. If you’re purchasing a home in a hot seller’s market, you should be mentally prepared for the chance that the homes you are looking at could go over asking price and that you will have to be more aggressive with your offers. Either way, a good agent will be able to give you a complete analysis of what your real estate market looks like and how you can best compete (and win) against other buyers.