When you are buying a home for the first time, it’s easy to make mistakes. You have never bought a house before. It is easy to get caught up in the excitement of homeownership, but you will need to remember that owning a home is more than just paying a mortgage. And you don’t want to fall into the trap of looking for houses first, and then finding financing. Not only might you lose out on the house, but you might find out that you aren’t approved for enough a loan to buy the house that you want.
Don’t worry; buying your first home can be a great experience. You just need to take it slow, do your research, and ask for help when you need it. Here are four mistakes first-time homebuyers can make, and how to avoid them.
Mistake #1: More Than a Mortgage
You made the decision to buy your first home because you felt that you were ready to take on a mortgage. You can afford the payments, so why not? That’s the first mistake new homebuyers can make. Owning a home isn’t just the mortgage payment. And being able to afford the mortgage payments shouldn’t be your reason for buying a house.
Owning a home is more than just paying a monthly mortgage. You will also have to pay property insurance, taxes, maintenance, higher utility bills, and possibly even homeowners association fees (also known as HOAs). Those are all on top of your mortgage. Your monthly payment for the house is only a small piece of what you are actually paying when you buy a home.
To make the most of owning a home, you are going to want to live in it for at least five years. Any less than that, and you probably don’t want to consider buying a house. You need to live in the house for at least five years in order to have any chance of at least breaking even.
Mistake #2: Home First, Mortgage Later
If you think that buying a home starts with finding a home, you’d be making the second mistake first-time homebuyers can make. Your journey into home ownership begins with getting prequalified and preapproved for a mortgage. Unless, of course, you are fortunate enough to buy your first home with cash.
Don’t be afraid about getting prequalified for a loan. It’s actually a much better strategy than just finding a house you like first. Getting prequalified lets you know how much house you can afford, and it gives you a decent ballpark for how much your payments will be. It’s much better to get the loan in order, and then start looking for houses.
Mistake #3: Avoiding Professional Help
This is true whether you are buying your first house or your third. Use a local and trusted real estate agent. Your real estate agent is here to help you. Use their experiences and knowledge to help you navigate buying your first house. A real estate agent isn’t the only professional that you are going to want to use, either. A good loan officer will make the loan process go much better, and depending on the circumstances, a lawyer can be helpful as well.
Buying a house is a big purchase. But it’s also an even bigger investment. You want to make the right, and smart, choices, and sometimes that requires professional help. Ask friends and family that have bought homes before for referrals. Remember that your real estate agent, loan officer, and lawyer are here to help you buy your house, and to make the best decision possible.
Mistake #4: Using All Your Savings for a Down Payment
Sure, putting 20 percent as a down payment means you don’t have to pay for private mortgage insurance. Which, if you can afford, is a good thing. However, it’s not a good thing if that 20 percent down payment wipes at all of your extra savings and money. In that instance, it’s much better to pay for the insurance, and have a slightly higher mortgage payment, than to not have any savings left.
Buying a house is more than just a mortgage. You might need that extra money for something else related to your home, or something else might come up. It’s always a good idea to have extra money set aside, just to cover anything that might come up, home related or not. The risk of living on the edge of poverty is not worth the savings that come from putting 20 percent down.