Rookie Mistakes for the First Time Home Buyer
Buying your first home is a very exciting process as well as a very stressful process. Many first-time home buyers lose sight of the bigger picture during this process and make very costly mistakes. As the saying goes “knowledge is power” the following tips will help you ask the right questions so you can feel confident that you won’t make the rookie mistakes and end up in the right house for you with no buyer’s remorse.
1. Looking at Houses before Talking to a Lender
With open houses being so popular, it is easy for potential buyers to come look at the house before even talking to a lender. This is a waste of time for several reasons 1) you are wasting the realtor’s time 2) if you love the home then by the time you are qualified for the mortgage it may be off the market and 3) you may be shopping outside of your budget. Before submitting an offer on a property, realtors require a letter from the lender stating they are pre-qualified; this demonstrates that the potential buyer is serious. In some markets, including Chico, homes are not staying on the market for long. This means that you may have found the perfect home and it will be gone by the time you are qualified. Most first time home buyers do not have a realistic idea of what their budget will be, instead they shop on what they prefer in a house. While we all prefer a bigger backyard or a bigger closet it is essential to talk to a lender to see what you can realistically afford.
2. Talking to One Lender
Many first-time home buyers only talk to one lender, which is a costly mistake because they may be leaving thousands of dollars on the table. Not only does shopping around help ensure that you are receiving the best rate possible, it also ensures that you are going to get a lender that you feel comfortable with. Communication is key in a real estate transaction, so a responsive lender results in a smoother transaction which means less stress for you.
3. Spending Their Entire Savings on the Down Payment
Spending your entire savings on the down payment leaves the buyers with no funds left to close the transaction or unexpected living expenses. Owning a home is an expensive venture and not being prepared will cause unnecessary stress. To avoid this, make sure you have enough for a down payment AND 6 months of living expenses in a separate fund. This way, if anything pops up, you have the money put aside.
4. Fixating on the House instead of the Neighborhood
In real estate the key to any good investment is Location, Location, Location!! While many people understand this in theory, it goes out the window as soon as they start home shopping. Different neighborhoods have qualities, some more obvious than others. Crime rate, school districts and the amount of traffic in the neighborhood are examples of things that affect the neighborhood. Your real estate agent should know the local market well enough to give you this information. This may result in you passing on your “dream house” because the neighborhood is not in the best location which will affect resale value when you go to sell the home. It is always best to look at both the house and neighborhood as a whole.
5. Letting Emotions Run the Process
Buying a home is an emotional process, this is where you and your family will put down roots and make memories. That being said buyers need to approach the home buying process with as little emotion as possible. Letting emotions dictate the process may result in buyers over paying for the home, buying in a marginal neighborhood or stretching their budget to the point of financial instability. Approaching the home buying process with a business mentality will ensure that you make the best buy you can.