While buying a home for the first time can be an exhilarating experience, you do need to take care that you don’t end up regretting your purchase. 63% of millennial homebuyers—most of who are first-time owners—have buyer’s remorse about their property.
Buying a home is a huge financial responsibility that shouldn’t be taken lightly. Here are eight common first time home buyer mistakes you’ll want to avoid so that you don’t rush into a home that will make you unhappy.
1. Not Getting Pre-Approved For a Mortgage First
In today’s competitive real estate market, buyers who have already been pre-approved for a mortgage before viewing a home definitely have the upper hand. This means they’ve already had their income and credit score verified and can feel free to make offers on properties they’re interested in.
If you haven’t been pre-approved for a mortgage yet and you’re interested in a home, you’ll have to apply and wait for a lender to approve you. In the meantime, the seller can very easily decide to accept an offer from another buyer who already has that pre-approval letter, and you’ll miss out.
Getting pre-approved for a mortgage will also give you a better idea of how much house you can afford or if you’re even financially ready to become a homeowner yet.
2. Not Shopping Around For a Mortgage
Not all mortgage lenders are alike. It’s a good idea to try to get approved by three or four different mortgage companies to get a sense of the pros and cons of each and decide which rate will work best for you and your budget.
If you’re not sure where to begin, the free service Own Up—which was launched with first time home buyers in mind—can give you a range of affordable mortgage options to compare. With interest rates still at historic lows, it’s worth shopping around for a lender that can give you the best deal.
3. Not Taking All Ownership Expenses Into Consideration
Homeownership costs money—sometimes more than what people anticipate. If you’re currently renting, you don’t have to worry about paying for property taxes or maintenance if something in your rental breaks down. But once you own a home, those additional expenses become your responsibility.
If you’re buying a condo or townhouse, you’ll also have a monthly association fee to pay—which can increase every year—and possibly special assessment fees for a period of time if the condo building needs repairs or upgrades.
You’ll also need to purchase home insurance to protect it against fire, floods, and storms. In other words, owning a home often means a lot of additional expenses that not everyone is prepared for.
Before you buy a home, you need to add up every monthly expense and make sure that not only does your income more than cover them and your other living expenses but that you have enough money saved in an emergency savings fund in case you lose your job or you find yourself facing an unexpected repair. Your on-going monthly responsibility is often more important than how much you have for the downpayment.
4. Not Planning For Closing Costs
In addition to making sure you have enough money to cover your monthly expenses, the downpayment, and the home inspection, don’t forget about your closing costs. They can cost anywhere between three and five percent of your home’s purchase price and typically cover title insurance and attorney fees.
Some mortgage companies will offer you a higher interest rate for your monthly payment in exchange for lower closing costs. You’ll need to weigh both options carefully to determine which is the best option for you in the long term.
5. Choosing The Wrong Town or Neighborhood
Location is still everything when it comes to real estate, but too many people rush into a purchase without researching the town or neighborhood the new home is located in.
If you have kids, you’ll want to pick a town that has a good school system. If you work out of the home, you want to make sure you don’t end up with an exhausting commute. Or maybe a neighborhood watch system is important to you.
It can be challenging when inventory is low, but try to make sure you pick a location that you know you and your family will enjoy living in for years to come.
6. Getting Too Attached To a Property
It’s easy to fall head over heels in love with a home that you think is perfect, only to be let down when the house inspection reveals water or mold damage that will cost additional money to repair, or your funding falls through. Although it’s challenging, try to remain neutral about a potential property so that you don’t end up disappointed if it turns out to be the wrong match. Try to keep an abundance mindset and know you’ll find the right home.
7. Not Reviewing Condo Association Documents
If the home you’re looking at happens to be a condo or townhouse, it’s a good idea to ask your real estate agent to get you copies of the association documents before you place an offer. This paperwork should have detailed rules on conduct, acceptable noise levels, restrictions on pets, use of outside property, and other regulations. They can give you a sense of how quiet and well managed the community is, as well as if the property is right for you.
After all, if you’re a dog owner, you don’t want to put in an offer on a condo and sign an agreement to buy it only to find out they won’t allow dogs and you’ll need to find a new home for Fido.
8. Skipping the Home Inspection
We get it—paying for a home inspection is another added expense in the buying process. As tempting as it may be to skip the inspection to save yourself some money, our advice is don’t.
A home inspector can uncover issues that you’ll never be able to detect on your own. In many cases, their findings can help you negotiate a lower price on a home or that the owner make repairs before you close. Having the house inspected will give you additional peace of mind that you’re making the right decision.
Avoid These First Time Home Buyer Mistakes
Above all, you need to take your time if you don’t want to make these first time home buyer mistakes. Make sure you can comfortably afford the house you’re interested in and that it’s a decision you can live with.
Looking to buy a home? Start here, so you can learn more about working with us and what you can expect throughout the entire home buying process. We’ll be happy to help you find the property that’s right for you.