Karen Behfar
Common Pitfalls for First-Time Homebuyers
For many first-time home buyers, owning their own house is a lifelong dream. Achieving this goal means that there will be some new experiences – and some may not be pleasant.
Buying a house can be an overwhelming experience. Understanding the basics of home-buying and asking the right questions to the right people will help you to have a smooth and hassle-free home-buying experience.
Here is a list of first-time buyers’ common mistakes:
Hesitating to ask for information or for clarity – Ask questions. It is reasonable to have a lot of questions and it is always best to be as informed as possible before making any major decision.
Taking out a bank loan for the down payment – Down payments can be from the buyer’s savings, from gifts, etc. However, taking out a loan to cover the down payment is not advisable. A downpayment is usually financed by money the buyer has saved and set aside for this purpose.
Failing to build or work on the credit score – It is important to have a good credit score because it is a factor that will determine credit-worthiness, rates, etc. This helps lenders decide if the buyer is qualified to take a mortgage and how much the interest will be.
Not getting a mortgage pre-approval before shopping for a home – This is critical! I can’t stress enough how important it is to get a pre-approval before you start looking to buy. Many times, couples tell me that their family is going to help them so they should start looking. Although I definitely value that, I really try to push them to speak to a mortgage broker and run all the numbers because there aren’t so many homes on the market within their price range. Many times, the inventory is limited and many buyers are also looking for a deal. So, when buyers finally find a home that they like, it’s very stressful to scramble to get a pre-approval at the last minute. Things can go wrong.
For example, the co-signer or the person giving the down payment is not ready with the money. Getting through the pre-approval is crucial for determining how much you can borrow, and it is important to just be ready to be able to buy. Home searching will be more focused and successful if the buyer looks for a home that is within budget, which will be determined by the mortgage that can be taken out.
Being uninformed about the closing costs – Closing costs include local property taxes, fees related to the loan, and title insurance. It’s a separate fee then the down payment. Many do seller’s concession and add it to the closing costs.
Lack or absence of negotiating closing costs – Closing costs are always open to negotiation. Having an expert real estate agent can be a big help in minimizing the costs.
Not considering the monthly mortgage payment before making an offer – It is wise that the mortgage payment should not consume more than a third of the buyer’s income, to make sure that enough funds are still left for emergencies and for leisure.
Lacking knowledge about interest rates – Even small changes in interest rates can affect a home’s affordability. Make sure that you are in contact with a mortgage broker.
Taking rejection personally – Buyers should know that home buying is sort of like a numbers game – buyers may not always get the first home they make an offer on or even the tenth home. Be ready and be patient.
Being unwilling to compromise on home features and neighborhood – Although it is wise to know what you want in a house, having a long list of must-haves can leave a buyer empty-handed. There’s always a give and take when buying a home and checking out different homes helps you narrow down your check list.
Waiving home inspections – Buyers must not waive inspections, except in extreme cases. If inspection is waived, later on serious problems might be revealed, such as foundation damage or mold. Then you may be left with more expenses than you planned.
Fun Fact
In 2020, there were an estimated 1,782,500 first-time home buyers. Since 2000, the proportion of home buyers who are purchasing their first home has been an average of 38 percent!