Buying a home for the first time can be a daunting and stressful process. But with proper research and the right real estate agent by your side, you could end up with your dream home by the end of it. The buying process as a whole has many steps, and going through this process for the first time it’s very possible to make some mistakes. To avoid these mistakes read what our experts have to say about the most common first-time homebuyer mistakes they see and how to avoid them.
Thinking you have to save 20%
Many first time buyers save for years for their first property, thinking that they need a 20% down payment. However, according to the National Association of Realtors, the average down payment is around 6% for first-time buyers.
Rather than putting the money into rent each month, first-time buyers who dream of homeownership should talk to a mortgage professional about their options.
Some lenders offer loan products with down payments as low as 3%, and even 0%, as long as private mortgage insurance is in place.
-Darren Robertson, Northern Virginia Home Pro
Not fully understanding the home buying process
Unfortunately, when buying a home for the first time, mistakes often come hand in hand with the process. One way to improve the chances that first-time homebuyers don’t make mistakes is by understanding what the most common mistakes are.
Over the past 10 years of selling real estate as a Rochester NY Realtor, undoubtedly the most common first-time homebuyer mistake I see is buyers not having an understanding of the home buying process.
Many first-time homebuyers believe that buying their first home is as simple as hopping in their car, looking at dozens of homes, and moving right in! While the home buying process doesn’t have to be as complex as solving a Rubik’s cube, there are certain steps to buying a home that first-time buyers should be aware of.
Just a few steps that first-time buyers need to be aware of include getting pre-approved for a mortgage, learning how to interview prospective real estate agents, or understanding common contingencies that could be included in a contract. Bottom line, knowledge is power, and first-time homebuyers who don’t make the mistake of not understanding the buying process will have a much more enjoyable and successful experience.
-Kyle Hiscock, Rochester Real Estate
Not fully understanding homeowners insurance
With most lenders, taking out homeowners insurance is mandatory, so it’s important to take the time to fully understand all of the options, but many first-time buyers fail to do this. This leads to many buyers unknowingly overspending on unnecessary coverage or worse, finding themselves underinsured when crisis strikes. It is easy to overlook the mundane subject of insurance until your home is damaged and your insurance coverage won’t pay out – and by then, it’s too late.
Most people shop around for price, but it’s important to also research the extent of coverage being offered between insurers. Take the time to carefully consider just what coverage you require when it comes to fire, theft, or vandalism, and check for extra inclusions such as coverage for temporary accommodation in the event that your property is damaged beyond habitability.
-Meg Hunt, Best Insurance Companies
Not being flexible
For the first-time homebuyer, being flexible is a very important attribute that can really pay off once the buyer has completed the purchase.
Rather than looking to be swept off your feet by the perfect home, it might be preferable to look for the type of home in which you can build a lasting relationship by getting familiar with one another over time.
The analogy isn’t perfect, but you get the point. A home that you can grow to like—a lot—while living together might not be a stunner in the short term. It might, in fact, have some issues that you will want to resolve. But it is often wiser to seek the potential in a home rather than perfection and to consider long-term home suitability rather than short-term infatuation.
By keeping your options open and focusing on the possible during your home search, you should be able to realize the dream of homeownership while being true to your initial search criteria. It’s an investment of time and energy, as well as money. Buying a home is also the largest single investment most people make. Make it a wise choice.
–Gary Ashton Quote, Nashville Real Estate and The Ashton Real Estate Group of RE/MAX Advantage.
Only shopping at the top end of your budget
Working with first-time homebuyers is rewarding because we know the common mistakes they make and can help them avoid them. A common example is shopping only at the top range of their budget. Home values can vary, and you don’t want to spend all of your savings or reserves on the down payment. There will be expenses in homeownership that you absolutely should budget for, like unforeseen plumbing issues and upgrades. More importantly, by shopping at the top range that you qualify for, you miss out on the bargain opportunities. Home pricing fluctuates based on situations, such as someone needing a quick sale. Aim for 20% lower than what you want to spend to open up more options.
Another thing first-time buyers don’t appreciate is the need to get pre-qualified and in a timely manner. It’s important to go through this process at the beginning of your search before you start touring houses. Some markets are competitive, and if you find a home you know you want, you may need to be an attractive buyer to compete with others’ bids. The highest bid does not always win the property, often a reliable buyers’ agent sweetens the deal because the selling agent knows the closing will go smoothly with this agent. Having your pre-qualification in order not only gives you a leg up, it gives you a realistic budget and allows you to move quickly if necessary.
-Pete Evering, Utopia Management
6. Not getting your credit score in order
Credit scores are an important step in the mortgage application process – and they can make or break your chances of being approved for a loan. It can also influence the interest rate that lenders will offer. This is why it is so important to check your credit score before you apply for a loan.
Firstly, it is surprising just how easily a bad credit rating can slip by undetected – a warning letter lost in the post about a payment you had no idea you missed, for example. Often, bad credit items can be rectified and removed by effective communication with the debtor, but that can only happen if you know about the item in the first place, so check your credit score no matter how confident you are that it is pristine.
Secondly, knowing the contents of your credit score report allows you to work on cleaning it up, and enables you to broach the subject with your prospective lender. In some cases, bad credit that has arisen due to a specific and unavoidable situation, such as a sudden illness or trauma, can be looked upon far more favorably if context and supporting documentation is provided, as well as proof of repayments.
Ideally, any poor credit items on your report that can be easily rectified and removed before applying to a lender should be. But, even if that isn’t possible, knowing what’s on it and being able to provide context to the lender regarding the circumstances can go a long way towards a favorable mortgage outcome.
United States
Canada