If you have never bought a home before, it can be easy to feel overwhelmed by the process and frustrating when you find certain things out the hard way. Don’t feel defeated or alone in this process. Plenty of other first time home buyers have made many of the common mistakes that we will mention further on in this blog. But that’s why you don’t want to go through the home buying process by yourself. An experienced real estate agent can help you avoid common pitfalls and fully guide you through the entire process step by step. While a great real estate agent can’t help you avoid every single pitfall, educating yourself about the real estate market and home buying process is a great first step. Keep reading to learn about six of the most common mistakes that first time home buyers will make.
Underestimating the Cost
Unfortunately, many first time home buyers will underestimate the actual cost of buying a home. While the initial price tag may seem affordable and the mortgage payments work out to a price you can manage, there are many other financial factors that need to be accounted for before you decide that you really can afford a home. Along with the mortgage that you will be paying back to the bank, you also have to consider the cost of homeowner’s insurance, a PMI if it’s applicable, and property taxes. This is all required monthly payments before you even factor in home maintenance and some of the big expenses that can easily surprise you when you least expect it.
Along with not fully understanding the costs associated with homeownership, it’s easy to make this one crucial mistake. Younger individuals will often wonder how they’re ever supposed to save enough money for a five percent down payment on a home, let alone have any additional savings on top of that. But it is very important to keep your down payment separate from your savings. You don’t want to deplete your savings account simply to come up with your down payment. Even if it means more time waiting to become a homeowner, save enough money so you can have the down payment you want and still have money set aside in savings.
Making Too Many Purchases at Once
While you may finally have the money to buy everything that you want in a short period of time, from that new dream home to a new car, you have to be very careful during the home buying process to not change your credit rating drastically. Before you go under contract on a home and on the day that your loan is approved, a credit rating report will be pulled in order to check that your financial situation has not changed during the gap. Buying a car, investing in a big trip, or any other purchase that increases your your debt could potentially put the brakes on your home purchase. It’s great if you have the money to make the kinds of purchases that you want to, just wait until you close on your home to make any additional ones.
All Cash Market?
Recently, we’ve seen a lot of changes in the real estate market and a growing divide between the generations. The baby-boomer generation can sometimes opt to purchase either a home or investment property, and do so in cash. This can sometimes create a point of contention where younger individuals and first time home buyers are relying on bank financing in order to make a home purchase. This may make it difficult to make a competitive offer in a cash market. If a seller can get a cash offer which is guaranteed, then they may accept that one over having to work with a bank to make sure that a buyer’s financing goes through.
Skipping the Home Inspection
We touched on this a bit in a previous blog, but simply said, don’t skip out on a home inspection. Part of making an offer on a home for sale is to indicate whether the offer is contingent on a home inspection or not. Sometimes first time home buyers will think that this is not an important factor in the home buying process and that they will be just fine without it. Do not assume this. A home inspection can reveal many under-the-surface problems that could turn your dream home into your worst nightmare. Get a home inspection in order to know what you’re spending a large chunk of money on.
Buying a House for Investing
Some first time home buyers simply want to get into the real estate market as an investment. While you will probably make money, especially if you time your purchase right, real estate is not a very liquid asset. This means that while you may turn a profit, you may only turn a small one or expect to be invested for a substantial amount of time before you see a large equity gain. Simply put, buy a house to have a home and the equity gain is just the icing on the top.
Here at Berkshire Hathaway HomeSource Santa Fe, we want to help you have the easiest, most hassle-free home buying experience possible. The more you know, the easier it will be to avoid pitfalls that others have made before you. Let our experienced real estate agents be your guide and help you find the home of your dreams whether you’re a first time home buyer or buying your fifth house. Contact us today for more information!