You’ve been saving for such a long time, and finally, you are ready to give up renting and invest in a home of your own.
It is exciting, thrilling, and vaguely terrifying because you have never done it before.
Welcome to the world of the first-time buyer, and these are the home buyer mistakes to avoid:
#1 Searching High and Low
One of the common first-time homebuyer mistakes is looking at attractive houses for sale outside your affordability zone.
This mistake applies to homes you can’t afford and those that are too cheap.
You need an affordable house within your means, and looking at luxury homes that are out of your reach wastes time for you, the agent, and the seller. You do not want to gain a reputation as a time-waster when looking for your first home.
Plus, if you are self-employed, time spent looking at houses you can’t buy means you earn less and can afford less.
On the other hand, there are incredibly cheap houses.
While it may be tempting to think these are a bargain, generally, they come with issues that you don’t have the experience to evaluate or resolve as a first-time buyer.
Avoid this common home buyer mistake by working out what you can afford, and then concentrate your home hunting efforts on houses that fall into your affordable bracket.
#2 Not Shopping Around
The first house you see may be your dream home, and the first bank you approach may offer you a mortgage you can afford.
Buying a house is a serious long-term investment and is probably the most expensive item you will buy.
It makes sense to shop around to see what homes are available and to get the best deal on your mortgage interest rate and conditions available.
First-time home buyer mistakes include settling for the first affordable house and the first mortgage offer.
You may worry that you won’t get another offer if you don’t grab this deal, but you will. If one bank is prepared to finance your house purchase, then so will another.
Consider using a professional to find the best deal for you in the mortgage market.
#3 Failing to Cultivate Your Credit Score
A clean credit score is the key to getting the best interest rate and a favorable response to your mortgage inquiry.
While you save for your deposit and through your house-hunting phase, keep your credit score clean and preferably work to improve it.
The top ways to cultivate your credit score include:
- Correcting errors – you may need a credit repair company if these are severe.
- Pay your bills on time.
- Decrease your debt.
- Borrow and repay regularly – handling your credit builds reliable credit history.
- Avoid hard credit enquires for new credit cards or loans.
#4 Skimping on the Deposit
It is a fine line between cleaning yourself out financially and not putting down enough on your deposit to give you the best interest rates.
Mortgage lenders weigh up the extent they are risking their money versus the amount you are risking on the house purchase.
If you can comfortably put down a larger deposit, you can pay less interest and have more affordable monthly payments.
#5 Too Proud to Accept Help
You are an independent adult, and you want to buy a home, but your circumstances may mean you can get help from your State, specialist lenders, or your family.
If assistance is available to let you buy a house on special terms or with a minimal deposit, do not be too proud to accept it.
A common home buyer mistake is to fail to look at all your financing options.
Perhaps no assistance is available in your area, but don’t miss out by not opening your eyes to the possibility.
#6 Failing to Do the Math
There are a lot of numbers involved in buying a house and many rates and options to compare.
Some lenders will offer you the chance to buy a discount on your mortgage for a set number of years.
One of the common first-time homebuyer mistakes is failing to do the simple calculation that tells you if paying that premium will save you money or cost you more.
You may consider yourself to be number phobic, but when it comes to buying a house, use a calculator and double-check everything from the mortgage rate, discount premiums, and the saving in the interest rate for increasing your deposit.
If you have different options, check the math before deciding.
#7 Exposing Yourself (Financially)
Although it is tempting to take the maximum mortgage available and invest all your savings in your dream home, it is essential to look after your financial health.
You need to be able to afford your monthly commitments and have something in reserve for emergencies.
Homeownership is expensive – the roof may spring a leak, the shower needs replacing, and your financial circumstances may change.
The top of the home buyer mistakes to avoid is leaving yourself financially vulnerable to demands for repairs or other emergency expenditures.
Try and budget to keep two- or three-month expenditure in reserve as a safety net, and don’t buy a house that leaves you on a monthly knife-edge in meeting your commitments.
Further, you need to budget for basic furniture and appliances when you move into your new home.
#8 House Hunting Without a Clue
A common home buyer mistake is to start house hunting without a provisional offer of funds.
It may seem the wrong way round but arranging your potential finance before you start looking at houses means sellers and agents will take you seriously.
Imagine you and someone else want the same house.
Who is going to be in the best position?
The person with the provisional funding agreement or the one without?
A pre-approved mortgage offer in principle opens doors and makes the whole process less stressful for everyone.
Home-buyer mistakes to avoid include a failure to budget for all the additional expenditures and fees. Try and get an idea of what the surveys and other costs will be in advance of looking for a new home.
#9 Head in the Clouds
One of the most common first-time homebuyer mistakes is to have an unrealistic image of what your first home will provide.
Everyone has a dream home, plenty of beautifully landscaped grounds, spacious rooms, exquisitely finished, but your first home is unlikely to match those dreams.
If the expectations of your first home are unrealistic, every home you view will leave you feeling vaguely dissatisfied.
Try and approach your first-time home buyer adventure with the object of getting the best investment for your money instead of searching for an unattainable dream.
#10 Unrealistic View of Renovation Costs
You find an affordable house, but it needs some work.
You do not have much experience in the construction trade, but it cannot cost that much to put it right, surely?
Even when you get quotes for renovations and repairs, you can expect it to cost a chunk more than you wish.
One of the home-buyer mistakes to avoid is an overly optimistic approach to a “fixer-upper” without the benefit of personal experience.
Try and get a professional opinion on likely costs and remember, if you take on this project, you also need to live through the work and mess.
#11 Unrealistic Timescales
One of the first-time home buyer mistakes is expecting the process to be relatively quick.
Finding the right house takes time, negotiation takes time, and so does the paperwork.
Don’t risk being homeless by giving up your rented property in the expectation that you may move into your new home in a week or two.
You can ask for a timeline, but mishaps occur, and until you secure the property, the time scale is changeable.
#12 Being Invisible
It is a small thing, but have you registered to vote?
Part of the home buying process involves lots of background checks, and being on the appropriate electoral role helps reassure people that you exist.
It is easy to let your registration slip if you move around on a short timescale but sort your registration out before you start house hunting.
#13 Failing to Read the Small Print
House hunting involves heaps of paperwork, regardless if you buy a new or an old house.
It will help if you read everything from the mortgage offer to the professional surveys.
It may be tempting to skim, but this is a considerable investment of your time and money so read everything.
If your property is part of a complex, get hold of the Homeowners Association terms and read that, check with your local planning office, and definitely read and understand anything that deals with money or property condition.
#14 Non-Standard Properties
You may dream of living in a converted lighthouse or be happy with a home above a commercial property, but lenders have other ideas about the value of these properties.
As a first-time buyer, you are more likely to get a mortgage offer with a typical traditional house or apartment rather than a non-standard property.
For your second house, you can experiment with non-traditional housing if that is where your dreams lie.
#15 Not Asking Questions
You can’t ask too many questions.
It is a new process for you so ask all the questions you can think of and download some lists of the questions you can’t think of yourself.
Ask your lender to explain what all the terms and conditions mean; ask the seller if they enjoy living in the house; talk to the neighbors and ask the mailman if it is a good neighborhood.
#16 Ignoring the Negatives
The view from the windows is magical; you can see yourself with your morning coffee watching the sunrise.
But there is a distinct musty smell in the basement, and the lights flicker alarmingly when you switch them on.
A common home buyer mistake is to focus on what you like about the property rather than taking a pragmatic view of its faults.
Before deciding on this property, ensure you have a clear picture of potential issues and their impact.
#17 Not Seeing the Potential
When house hunting, you look at what you are getting for your money but stay alert to future potential.
This house may only have two bedrooms, but you can buy an affordable house now and build better later if it has room for expansion.
Don’t neglect the potential in a house by focusing too narrowly on the property as it is now.
Most humans make decisions on first impressions; that hideous bathroom may put you off a charming house with spacious rooms in a great neighborhood.
Try and see below the surface grime, wear and tear, and tasteless décor choices to the potential home for you and your family.
#18 Only Looking at the Property
The first thing a house-buying expert will tell you is that location matters.
The house may be charming, but if run-down properties and an unsafe neighborhood surround it, it may be a poor investment.
Consider the area as it is today and what it might be in the future – green fields may see development, and that quiet road may be a commuter nightmare.
You can’t divorce the property from its surroundings, so you need to love the house and the neighborhood.
The same principle applies whether you buy or build a home.
#19 Rushing to Buy vs. Dragging Your Feet
Both approaches are first-time home buyer mistakes.
If you rush to buy, then you fail to ask enough questions and consider your options. If you are slow in putting in an offer, you lose out to a more organized buyer.
It would be best if you balance moving swiftly with due diligence.
#20 Paying Too Much
A lot of interest in the property can promote competitive bidding, and you offer too much for the house.
Unfortunately, you can’t guarantee that house prices will rise to cover that excess.
A common home buyer mistake is to be unaware of the market value of properties in your area.
The research is super-easy to do today; you can find out how much similar houses sell for and when in a few minutes with a cup of coffee and an internet connection.
Home Buying Mistakes to Avoid Most: Emotional Attachment
Home buying is an emotional process – you invest your dreams long with time and money.
An emotional attachment to buying this house instead of a suitable house can result in you paying too much and taking on a home in need of extensive renovation.
First-time home buyer mistakes nearly always spring from emotional involvement.
You are afraid that you will never find another house, or you see yourself raising a family in this area with that fabulous view.
Property is an investment in your family and your future, but even people who build their dream home eventually pack up and sell.
It is not wrong to buy a house that delights your heart, but in the absence of a crystal ball, use your head and invest in a home with potential.