Buying your first home is a formidable life opportunity, but also a major undertaking that requires the utmost caution. Between finding the perfect property and dealing with lenders and mortgage applications, first-time homebuyers often commit lapses that can prove costly and harmful down the road. As with any investment, it does come with its fair share of risk, for those who do not pay attention to the fine prints.
In case you’re looking to acquire the first property, we’ve compiled 8 of the most common mistakes to avoid for a lucrative and successful long-term purchase.
Undermining Your Credit Score
As you’re certainly aware, buying your first home is a humongous transaction. As such, you’ll need a trust-inspiring personal credit score to secure the best deal on home loans, down payments, and mortgage installments. Give yourself some time to achieve a better score if your current finances are unsatisfactory; it’s bound to help you with the next steps.
Going in Financially Unprepared
Likewise, the only reason you should consult listings when buying your first home is to get a sense of current market prices. Before you start fantasizing about that 4-bedroom mansion, make sure you find a qualified lender who’s willing to help you achieve your project. It’s good to keep your options open and visit several financial institutions before signing any contract.
They say if you go into a mortgage with a specific figure in mind, you should ideally add another 10% onto the sum for breathing space. And there are always additional fees that we don’t consider, from the cost of renovation to hidden fees, and specific taxes like the land transfer tax. Using a land transfer tax calculator and being savvy of your own expenditure helps to make sure you are covered in every way possible and won’t fall foul of hidden costs.
Doing It Alone
Beyond these money considerations, it’s essential that you be surrounded by professionals who will know how to guide you through your purchase when buying your first home. Typically, you’d hire a realtor, but a buyer’s agent mandated by the seller will also be there to help you in the process. In some states, you’ll even be required to have legal representation (usually a real estate lawyer) to verify your solvency and conduct the final purchase.
The Buying Vs. Renting Dilemma
Many people believe that owning a property, rather than renting one, is automatically more beneficial: Misconception! In fact, there are advantages and disadvantages to renting and owning a property. It’s crucial to be aware of the pros and cons of the two options before making a decision. Owning a property, usually entails supplemental expenses, maintenance costs, and higher utility bills.
On the other hand, renting a property will give you maintenance savings, since the property owner is likely to keep the property in tip-top condition. As for the advantages of buying your first home, they include a sense of permanence, security, and privacy, which is not the case with renting one. Furthermore, some people would consider buying a foreclosed house. Buying a foreclosed house is considered a way for both the owner and the buyer to get a great deal on the property. Nevertheless, the potential financial rewards might come at a price.
Accordingly, if you live in California, USA, this foreclosure sellers guide will give you some insight into the foreclosure process. It explains that homeowners in this situation are likely to sell their properties at a price lower than market price. Nonetheless, never overlook the essentials that make the house desirable just because there is a significant discount. So, again, it’s important to weigh up your options carefully.
One aspect homebuyers tend to neglect is conducting thorough property searches, via multiple channels when buying your first home. It’s never a good idea to rely solely on internet listings and online photos. Trust your agent or entourage to help you navigate different options.
Always visit potential listings in person, more than once, with your companion or family members. That way, you’ll get to experience it for yourselves and be in a good place to decide whether or not it’s the right choice for you.
“Location, Location, Location”
This is the number one rule in real estate. While there are countless things you can change or improve in a house, sadly, location isn’t one of them. Many first-time buyers will deliberately sacrifice this essential criterion (i.e. Preferred neighborhood or town) just to save a few thousand dollars or acquire more square footage or an extra bathroom.
You should always favor properties close to your work and that offer convenient access to urban amenities. This is essential when buying your first home.
A fundamental guideline in your estate hunt is to never undermine the importance of property inspection. In fact, while a potential house might look perfect on the surface, it may conceal flaws, or worse, structural damage, that is not visible to the naked eye. Consider having an expert accompany you on your property visits. It might cost you a little, but it doesn’t compare to undertaking unforeseen renovations.
Making an Emotional Purchase
This one is a great recipe for buyer’s remorse. It’s quite natural to fall in love with a piece of real estate, but not to the point of letting it dictate your final decision. If you let your emotions take over, you’re bound to commit crucial errors (overpaying, waving certain clauses in your buyer’s contract) that will come back to bite you later on. Never rushing a purchase will guarantee a stress-free process.
Ultimately, homeownership is a life goal for many. Because it will be one of your most memorable purchases, you should always be prudent and persevere when looking to acquire your first ever property. Hopefully, this guide has enlightened you on some of the best practices to avoid while accomplishing this dream!