Don’t Press Your Luck – Avoid These 6 Mistakes When Buying Your First Home

It’s both exciting and a little scary to buy a home, whether it’s your first or fifth. That feeling of nervousness and not knowing what to expect is normal! 

But, what you don’t want to rely on during this process is luck or chance.

Everyone wants the “luck of the Irish” when looking for a home, but it comes down to much more than luck.  It takes a strategy from start to finish if you want to find the right home for you, especially this year with home inventory at 40 year lows.

You can still wear green and keep that 4-leaf clover in your pocket as a buyer if that makes you feel better. But, as the saying goes, don’t press your luck and make sure you steer clear of these mistakes below:

Mistake #1

Not knowing how much you can afford. Think monthly payments first and foremost, not just the purchase price. Next, get pre-approved by a lender BEFORE you start looking at homes. A lender may approve you for more than you are comfortable spending per month, so ask them to tell you the purchase price that correlates to the monthly payments you can afford, not the highest purchase price possible.

Make sure you understand the correlation between your purchase price, monthly payments and down payment required. This is different for every home buyer. Your friend at the office might be able to afford a much more expensive house by putting more down, for example, so make sure you know what your particular situation is and look for homes accordingly.  Your lender should consider property taxes, insurance, and HOA fees, but you will need to mentally calculate utilities, repairs and maintenance into your monthly budget.

Mistake #2

Not realizing that the wrong mortgage can cost thousands of dollars of needless interest. You might qualify for an FHA mortgage, but you have HUGE monthly mortgage insurance premiums that drive up your monthly payments. Plus, there are some great loan programs available right now that can save you hundreds of dollars a month.

There are all sorts of loan options available these days and the “right” one is based on your individual financial situation and how long you plan to own your home.  One loan does not fit all, so consult a diligent lender who can help you decide which option is the right choice for you!

Mistake #3

Not discovering hidden defects before you buy a home. Never buy a home without a professional home inspection. But even before you reach that point, YOU need to know what the potential problems are in the home. From the get-go, ask the seller questions such as: How old is the heating and air conditioning system? When was the roof last replaced?

Often there are warning signs that can be seen during a showing that may not have been disclosed by the seller. An experienced real estate agent, while not a qualified home inspector, should be helping you look for these obvious “red flags” before you even get under contract.

Mistake #4

Not knowing how much your credit can affect your ability to buy a home. Lenders are tougher now and you need to have a decent credit score to get a low interest rate. About 3 – 6 months before you want to buy a home, start monitoring your credit online. You can go to websites such as www.myfico.com and pull your own credit for free. Do this very early on, before you start looking at homes, so you don’t have any surprises.

Most credit issues can be repaired but it can take a few months, so if you aren’t monitoring your credit on a regular basis, check it early on in the process.

Mistake #5

Thinking that you need to sell your current home before purchasing your next one. For some, this may be the easiest route, but if you do not have a place to live between homes, there are options!

A bridge loan is a short-term financing option that allows you to purchase your next home before paying off your current one. This allows you to take as much time as you need to find your next home and not have to include a home sale contingency in your offer. There are options for interest only payments that can help keep costs low. However the interest rates on these loans are often slightly higher than a standard mortgage and not all may qualify.

Another option is to include a home sale contingency in the offer to purchase your next home. This is a clause in your purchase agreement that states you must sell your current home before being obligated to purchase the next. If your home doesn’t sell in time, you aren’t on the hook for two payments. While this carries less risk to the buyer than a bridge loan, sellers are less likely to choose offers with this type of contingency if they have other offers.

There may be more “out-of-the-box” solutions based on your individual circumstances, so consult with an experienced real estate agent to discusss the best options for you.

Mistake #6

Not asking questions if you’re confused or need clarification. There are no stupid questions when you are making the biggest purchase of your life. Don’t hesitate to ask any questions! I’m here to help you along the way and can educate you on the process from start to finish.

You’re In Luck

You’ve got to be one step ahead when it comes time to finding your dream home in this market.  Hopefully now you feel a little more prepared to avoid some unnecessary pitfalls.

And, if you are thinking of buying a home sometime this year, reach out to me and let me know.  This year especially comes down to planning and prepping WELL before you want to make a move. 

Together, we’ll make a plan that works for you and your timeline and then put into action when you say GO!  This is just one of the ways we can make buying a home in this crazy market not just doable but actually enjoyable.