Posted by John Doe
Purchasing a home is certainly exciting, especially for first time homebuyers. However, there are a lot of traps that homebuyers can fall into, and first time homebuyers are particularly vulnerable to falling into them. Below you will find some of the most common ones with tips on how to avoid them.
- Not Getting Pre-Approved for a Mortgage
Not getting pre-approved for a mortgage is the number one mistake that first time homebuyers make. First of all, you are simply wasting your time by not having any idea of how much you could potentially spend on a home, perhaps you are looking at houses that are way out of your budget. This can set you up for a lot of disappointment.
Secondly, if you find a home that you love but end up in a bidding war, not having your financing in place tells the seller that you are not serious about making the purchase, making it more likely that they will accept someone else’s offer.
- Borrowing the Maximum Amount Offered
Borrowing the maximum amount of money you were offered is a very dangerous trap that could significantly burden you financially via mortgage payments that you simply cannot afford. Carefully assess your budget and figure out what monthly payments you could reasonably afford. Don’t forget to overlook things like homeowner’s insurance and the increase in utility bills that comes with larger homes.
- Not Saving a Significant Amount Beforehand
When it comes to down payments, a minimum downpayment of 5% is generally required. However, this would put you in the category of a high-risk borrower and translates into higher interest rates and additional fees. If you can manage to put down more than the minimum down payment, this will be very beneficial for you financially as you move forward. Also, avoid changing jobs and making big purchases, as this too can make you appear to be a high risk borrower.
- Not Setting Up a Home Inspection
A professional home inspection will ensure that your potential home is free of major structural problems, as well as a variety of other very costly problems. It can be very easy to pass on the home inspection if you find yourself in a bidding war and want to make your offer more appealing to the seller. However, this is a mistake and one that could cost you thousands of dollars.
Remember that it is important that you are present for the inspection. Keep in mind that if problems do arise in the inspection, this could give you up the upper hand in terms of negotiating for a lower price. Also remember that the previous owner is under no legal responsibility to fix any problems, even if they are discovered within a week or two of moving in.
- Purchasing a “Fixer-Upper”
Purchasing a “fixer-upper” is risky for everyone, but especially for first time homebuyers who may not have as much knowledge as to renovation costs. If you have little to no experience with renovations, you might find yourself eventually selling the home for much less than you originally paid. If you are still considering going this route, at least thoroughly research how much it will cost to renovate the home to see if it makes sense financially to do so.
- Paying Too Much for the Home
Without a lot of knowledge or experience when it comes to prices on the market, it can be very easy to overspend on your first home. To avoid this, it is important to do your research as to the market value of the home, and to set up a home inspection to ensure that there aren’t any problems that would require costly renovations. Carefully consider the ways in which you could also negotiate for a lower price to ensure that you get the best bang for your buck.
- Forgetting About Home Insurance Until It’s Too Late
Keep in mind that if the house cannot be insured for whatever reason–perhaps it is a house out in the country, which can make it more difficult to insure–this will mean that you won’t be able to close the deal.
- Not Having a Clear Idea of What You Need
Many first time homebuyers become too excited when attending open houses and looking at properties online, causing them to make two common mistakes: either they don’t have an idea of how much space they need–for example, how many bedrooms–or they completely overlook these things when they find a house that they like and become attached to. It is important that first time homebuyers have a clear idea of exactly what they need and that they carefully consider these things before purchasing their home.
If you are looking to buy a home, Mortgages, Mortgages, has a range of mortgage options. Contact us today for more information.