When you decide to buy your first home, you are given tons of advice from your friends, relatives, and co-workers about what you should and should not do. The problem is, some of this advice is not good and can lead to mistakes.
Here are some common mistakes that first time home buyers can make.
Not Getting Preapproved
Before you start shopping for a house, get pre-approved by a mortgage lender. Do not get pre-qualified and leave it at that; the pre-qualification is a loose estimate of what you might be able to get from a mortgage loan, a preapproval goes through your financial records to give you a more solid idea of how much you can afford.
If you start house shopping before you get preapproved, you may end up falling in love with a house you later learn you cannot afford.
Not Including Closing Costs in the Budget
There is more to buying a home than the down payment and the mortgage loan. You also need to pay closing costs, which are due when you sign the final mortgage documents and get the keys. These costs can include attorney fees and title insurance.
Closing costs are usually between three and five percent of the purchase price of the home.
Being Overly Picky
You may have a wish list for your new home that is miles long, but you may not be able to find a home with everything on your list that is in your price range. You will need to think about what you truly cannot live without and settle for those features.
Is having an extra bedroom more important than brand-new stainless-steel appliances? Choose the home with the extra bedroom; you can always upgrade the appliances on your own.
When you find a house that checks off a lot of items on your wish list that you can afford, it is also important to look at the neighborhood the house is in. If you completely hate the neighborhood, are you going to be truly happy in this house?
Buying a House You Cannot Afford
Just because you qualify for a $300,000 mortgage loan does not mean you should buy a house that is $300,000. It is important to figure out what you can afford for your monthly mortgage payment, before buying a house that is beyond that price.
Emptying Your Savings
There are going to be things that need repairs in the home, but if you completely empty your savings buying it, you may not be able to fix the furnace before it gets cold outside. Keep in mind, there is no landlord to call to fix things, you now have to do it yourself.
Try to keep enough money in your savings to cover some repairs, after accounting for the down payment, closing costs, and moving.
You will also have to pay for property taxes and homeowner’s insurance, and if you live in an area with a homeowner’s association, you will have to pay them a fee.