What To Avoid When Purchasing A Home For The First Time

Homeownership is exciting, especially when you buy a home for the first time. For many, it is the fulfillment of a lifelong dream. According to research, many compelling reasons exist to buy a home, including mortgage interest deduction, the pride of homeownership, and possible property tax deduction. However, buying a home for the first time can be a high-risk venture that could prove stressful if you don’t take the right step. Some mistakes could lead to unnecessary delays and financial issues. Therefore, knowing what to avoid during your home-buying journey is essential for a smoother and more rewarding experience. Below are twelve of such mistakes and why you must avoid them.

1. Searching for a home before applying for a mortgage

Buying a home for the first time can be exciting. Often, you may be tempted to view properties before speaking to a mortgage lender. However, this may not always be best, as property inventory might be tight, particularly in markets where buyer demands exceed affordable properties available. You might also miss out on a home if you are not mortgage pre-approved, which is usually the case in competitive markets. Get an underwritten pre-approval first to avoid missing out on your dream home or looking at properties beyond your budget. This way, you will come across as a serious buyer with the finances and credit to successfully secure a loan to complete the purchase. 

2. Speaking to only one lender

The first bank or lender you speak to may get you a mortgage. But it would help if you get a reputable mortgage officer who can assess your circumstance and identify any blockades ahead to provide you with a better understanding of your options. You will likely get a better deal and the lowest interest rates when you shop around and make good comparisons. Depending on your home-buying plan, you may speak to at least three lenders or banks and compare their rates and loan terms. Also, please pay attention to their customer service and responsiveness, which can be handy for enjoying a smoother mortgage approval procedure. Experts recommend consulting a good mortgage broker to secure the best deal available. 

3. Purchasing more than you can afford

You can be tempted to stretch your finances when you fall in love with a property. Yet, it may be a bad move, especially as home prices rise. In the current unstable economic times, you risk losing your home when you buy more than you can afford. You will also be in a tight corner when budgeting for your monthly expenses and utilities. In this case, it is best to focus on how much you can pay monthly instead of preoccupying your mind with a loan you may be eligible for. Let’s say you qualify for a $400,000 loan. There is no guarantee you can afford the monthly payments it comes with. So before anything, consider your other financial obligations, perhaps those that don’t appear on your credit report to learn how much you can afford on the house. 

4. Ignoring your credit report

Several errors on your credit report can be left unchecked if you don’t observe your credit score, potentially affecting your mortgage approval. That can reduce your chances of favorable loan terms and rates. Your lender or bank will likely review your credit report during initial approval and recheck it before the closing date. So any changes in your credit report can lead to changes in the loan agreement. For instance, if you fail to complete payments on your existing credit cards or purchase new ones before the scheduled closing, your credit score may suffer significantly and affect your financing. 

5. Missing out on assistance programs

Many assistance programs are available to assist potential first-time home buyers. These local government and community-based programs offer generous loan terms and grants, allowing you to put more money toward down payments. Some banks or lenders also offer reduced rates for individuals buying a home for the first time. These assistance programs make home-buying more convenient, especially when you make a significant down payment. You can explore available local and state-backed loans and grants to cover your down payment and closing costs. For instance, you can learn more on the $25,000 first-time home buyer grant application to make your home buying much easier. 

6. Moving too quickly 

Weaving your way through the mortgage process makes home buying complex. Unfortunately, many rush the process, which could prove costly later. For first-timers, it is advisable to avoid purchasing until you have a proper plan in place. Rushing the process may get you your dream home, yet you will be making a poor decision if you haven’t saved enough to cover the down payment and closing costs. You may also go through your credit report and address any item or habit that could be draining your budget. Take the time to plan a timeline for your home-buying at least a year ahead. Remember that mapping out this timeline may take months or years, especially if you have a poor credit score. Yet, taking the time to address these issues can boost your chances of getting pre-approved. 

7. Ignoring the neighborhood

Chances are you have envisioned certain features when searching for a home. After all, you want to invest in a property that meets your needs and expectations. But here is the downside; you could end up in an unsuitable neighborhood if you focus so much on the home’s aesthetics. Your chosen neighborhood or community will be crucial to your life and family. Therefore, you don’t have to overlook the need to find a neighborhood suitable for your values and culture since you can always remodel the property and add your desired features. You may search online or speak to local real estate agents to help you with crime and school ratings in the neighborhood. Consider the nearness to public transportation and necessities such as playgrounds and grocery shops to measure your commuting time. You can also visit the neighborhood at various times to get a good idea of everything, including traffic and community interactions, to see if the area appeals to you. 

8. Emptying your savings

This mistake is among the biggest a first-time homebuyer could make. Homebuyers must make at least 20% on down payments to avoid mortgage insurance. So it is not rare to see people emptying all their savings to make this down payment. Others may even decide to pay more. Unfortunately, this could prove detrimental since you will have nothing left for anything else. Avoiding mortgage insurance may save you some cash, yet it’s not worth the risk. Instead, strive to have at least three months of living expenses in your emergency fund. This way, you avoid taking a significantly higher risk by depleting all your savings to make a bigger down payment. 

9. Not discussing a homebuyer rebate 

Many first-time homebuyers are unaware of the homebuyer rebate concept. Per the concept, homebuyers earn a return of up to one percent on the property’s selling price, and this is deducted from the shopper’s agent commission. However, homebuyer rebates are unavailable in certain US states, so you may research to determine if it’s available in your region. Suppose you live in Oregon or Tennessee. In that case, negotiate with your agent to see if they will offer one at closing. A rebate on a $400,000 property purchase can amount to $4000 in savings. You can never go wrong by having an in-depth discussion with the right experts to make an informed choice.

10. Skipping home inspection 

According to a 2020 survey, many home buyers skip home inspections, exposing them to several risks. A home inspection is crucial for identifying and avoiding potential problems in the property. It may seem more convenient in the sellers’ market to forego home inspection during a bidding war. But it would be pointless to win the war only to bury yourself in one costly repair after another. That is because the home inspection benefits prospective buyers and lenders by revealing serious issues discovered in the property’s structure. The home inspector will provide you with a report on any issues in the home, and you may factor this into the negotiation to avoid paying more than you bargained for. 

11. Taking too long to make an offer

Waiting too long before making an offer may cost you the house you want, and waiting for the “perfect” property may mean passing on other good possibilities. Limited searches usually get limited results, so don’t be selective and prolong the process forever. On the other hand, resist rushing into it regardless of how appealing a house appears on the outside. Remember that you may be compelled to pay if you make an offer and the seller accepts, so ensure you’re 100 percent convinced you want the house before making an offer.  

12. Overlooking hidden homeownership costs

The new monthly primary and interest payment on your home can send a shock down your spine. But that could increase further when you include the homeownership costs. As a first-time homeowner, you must factor in several costs in your budget., not forgetting home insurance, utilities, property taxes, and upkeep and maintenance costs. You may pay at least $4000 annually on home insurance, taxes, and maintenance. Unless you have a substantial rainy day fund or saved enough to cover monthly payments, you can be overwhelmed quicker than you imagined. Your agent can assist with doing the numbers on your insurance, taxes, and utilities. You may also compare quotes when shopping for insurance and save a percentage of your home’s purchasing price to cover repairs and maintenance.