The 7 Deadly Sins of Buying Your First Home
The number of things you need to worry about when buying a property can be as lengthy as a CVS receipt, especially when you first dive into the process. So, before you start building those home tours, let’s look at some of the biggest and most common mistakes and miscalculations first-time homebuyers make so you can save money and avoid regrets.
(In case you’re wondering, six of the buildings pictured are masterpieces of modernist architecture. The seventh is the house from the Halloween movie.)
Looking Before You Are Pre-Approved for a Mortgage Loan
If you don’t like to be disappointed, don’t start going from house to house without first having a loan approved. Don’t even look for homes on the internet unless you’re dreaming. Once you’re seriously (or even semi-seriously) thinking about buying a home, the first thing you should do is get a home loan pre-approved. You may be pleasantly surprised at how much money people will lend you, or crushingly disappointed that you can only afford a shack. In any case, it is better to know the truth and not waste time in vain.
Applying for only one lender
Most of us compare prices when we buy a car or washing machine, but nearly half of homebuyers don’t go to different lenders for mortgages, even if they borrow hundreds of thousands of dollars. Interest rates, fees, closing costs and more can vary from lender to lender and this can add up to hundreds of dollars in savings in just the first year of owning a home, so make an informed decision by applying with at least three mortgage lenders. .
Not enough time for the process
Once loan pre-approval has been received, which usually takes 60 to 90 days, it’s time to start looking for homes. This process can be exhausting, so be prepared to put in some effort. On average, homebuyers spend 124 hours looking for the perfect crib and check an average of 19 homes before they find the right one. You will be spending a lot of time with your real estate agent. Speaking of which…
Working with an experienced professional
As with any profession, real estate agents vary greatly in knowledge and professionalism. Licensing requirements vary from state to state, but in general, becoming a real estate agent is not difficult. It’s a little harder to become a realtor (a real estate agent who is a member of the National Association of Realtors and is committed to its code of conduct), and a little harder to become a real estate broker (a real estate agent who has gone through additional training and licensing requirements and can hire agents to work in according to them). But ultimately, the position may not mean as much as finding the right person for you , so plan to do some research – get referrals from friends, do some online research, and don’t be afraid to schedule interviews to ask questions.
Caught in a real estate scam
First-time homebuyers are ideal victims of scams: they go through a difficult financial and emotional journey where everything is likely unfamiliar. The specifics vary, but common signs of a real estate scam include high pressure sales tactics, unrealistic “guarantees” and anyone who wants you to transfer money anywhere, especially if they tell you to do so immediately.
Buying a house with a friend
There are benefits to buying a house with a friend—you’ll probably be able to qualify for a larger loan, you’ll be able to share the costs and labor—but the potential downsides far outweigh the benefits. Since both of your names are on the mortgage, you’ll be on the hook if your friend stops paying. Credit rating companies don’t care about your individual contract and consider the mortgage to be 100% yours, so your debt-to-income ratio becomes ludicrous. The debate over housekeeping is much more serious than the debate over who should do the dishes. Overall, this is a good way to ruin your financial life and your friendships.
Don’t buy a house if you can
Buying a property is an incredibly hassle-free business, so it’s understandable that a lot of people keep filming. But it’s much better to pay off your own mortgage each month than someone else’s. On average, houses rise in price by about 14% per year. Not only is it a better return than most investments, you can live with it. There are many programs to help first-time homebuyers, from federal government grants for first-time buyers to state and city programs. Look into them; you may be surprised at what is possible.