At one time we’ve all made a buy that made absolutely no sense once it was done. You buy something that you thought to be completely necessary in the moment, only to wonder a few days later what inspired your thoughts. Most of the times, these buys are not life shattering and we can always recover from them. Not with a house, though. This is the kind of investment that most people rarely make so you want to avoid the trials and errors. For first-time homebuyers, the process is tedious but very important all the same. You’ll need the following tips to avoid some of the most common mistakes made by fellow rookie homebuyers.
This is probably your most expensive investment so far. When you find ‘the one,’ you may find it hard to imagine not having that house. The first step is to relax and not get too attached. There will always be another house if you lose one. You will also want to find several houses. That way, you will not get too emotionally invested in one house.
Going directly to the listing agent:
Some moves will not work well for you, like approaching the agent hired by the seller to act for his (seller’s) interests. Unless you have worked with the agent before and you know each other well, you’ll want to leave this task to your agent.
Assuming there are no rules for homeowners:
One of the beauties of owning your own place is the freedom that comes with it. You are free from obligations that are given by your landlord. Not so fast! Some new homes do come with restrictions, which are not as bad, as they’re meant to withhold the value of the property. It also mostly depends on the neighborhood that you’re in. For example, some may prevent you from starting a business in a residential neighborhood, thereby curtailing your plans if you had any. Read up first before you make any commitments.
Not saving enough money:
The down payment that you have saved for your house is only the beginning of your cash requirements; you will also have other costs that follow ownership such as buying new furniture and repairs, if any. It is recommended that new homebuyers have 2-3 months mortgage payments reserved in savings. You should also keep in mind that you will be expected to remit your property taxes as well as the closing costs that will be between 2 and 5% of the home’s price.
Not getting pre-approved for a loan:
Want to show the seller your commitment to the deal? Show them your pre-approved loan form from your lender. This will prove that you already have your finances in order and that the lender is assured of your ability to finance the mortgage facility they are about to give you.
Paying private mortgage insurance:
If you are not able to make a down payment of 20%, then you’ll have to pay private mortgage insurance; this is common among first time homebuyers. What you need to do is to inform your lender once you’ve paid down the 20% and/or owe less than 80% of the home’s value to the mortgage company. When your liability goes down to 79%, your lender updates your file so that you do not have to incur the now inapplicable PMI cost.
Not checking the price of insurance of the current home owner:
The location of your future home determines the cost of insurance. If say, you are buying a home with a beach front, the risks are water (floods) and wind. Therefore, the insurance for these two factors can be high. Be sure that you can afford it.
Not checking your credit score:
Statistics show that 42 million credit reports have errors, which range from misspellings to things that could actually ruin your credit score, such as late payments. You should check your credit at least three months prior to house hunting, if not more. If there’s an error, ask the credit bureau to kindly fix it; your interest rate depends on it.
Not getting a home inspection done:
Most first-time homebuyers are so emotionally sold on the house that they skip an inspection. The reality is, after you’ve signed the contract and can’t go back, you may find that your perfect house was not so perfect and there are defects that the owner should have fixed if they had been brought up in the inspection. Having an inspection done will save you some much needed cash on faulty items as the owner will have to fix them before the contract is signed.