For first-time homebuyers, purchasing a new house is an exciting experience. Whether you are making the decision because of a new job, to take advantage of an excellent market, to build equity or because you recently got married, becoming a homeowner is a wonderful new chapter in your life.
There is a great deal to consider when it comes to purchasing a home, and it is incredibly common for beginners to overlook quite a few things. This is not to say that first-time homebuyers aren’t prepared, but there are many steps and things to look for that come more easily for a seasoned homeowner.
It is important that you familiarize yourself with some of the most common mistakes that first-time homebuyers make. Here are six of them:
“Pick the house that not only works for your budget, but for your lifestyle.”
Not considering all the aspects
Owning a home is a great way to benefit from your years of monthly payments by building credit as well as equity. Unlike renting, you can think of owning a home as paying yourself back. With renting, you are paying a landlord but beyond the month you aren’t seeing anything in return. If you are only moving for a temporary amount of time however, or like the ability to be able to get up and go, then perhaps renting is a better option at this point.
When purchasing a home, there are a lot of factors to consider, and commitment is one of them. This doesn’t just mean mortgage payments, but also utilities, home repairs and property taxes. According to HomeEstate real estate blog, considering all of the angles is important, but not something that all new homebuyers do.
Borrowing the maximum
When you apply for a mortgage loan, your mortgage lender will qualify you for a certain amount. Bankrate noted that all too often first-time homebuyers borrow the maximum they can because they feel confident about their future. While feeling confident is encouraged, borrowing more than you should could end up harming you in the long run.
By only borrowing what you need, you will rely more on your budgeting skills and be aware of your limits. Additionally, borrowing only what you need allows for wiggle room in case unforeseen expenses occur or something changes, such as a new baby or a switch in jobs. Therefore, you should have an idea of what your monthly mortgage payments will be so you can plan ahead.
According to The Nest, the standard industry recommendation for monthly mortgage payments should be no more than 28 percent of your monthly income.
Not being aware of all the unseen costs
When purchasing a home, there is more than monthly mortgage payments to keep up with. And according to U.S. News & World Report, this is a mistake that first-time homebuyers make too often.
There might be home repair costs that can be identified in a home inspection, which should be worked out before the purchase is complete. Likewise, you need to consider property taxes, utility costs and maintenance. Depending on where your new home is located, there might be neighborhood association fees. Before purchasing a home, it is important to be aware of all fees affiliated with it.
Choosing a home based on emotions
There is no argument that you should fall in love with the home you are going to purchase, but that shouldn’t be your only criteria in the selection process. Money Crashers noted the importance of visiting a home multiple times before making an offer. A good idea would be to see the house in the evening as well as the day, just to see how the home catches light and what the yard looks like in both settings.
Similarly, it is important to visit more than one property. It is unlikely that the first home you visit will be the house of your dreams, but your excitement about house shopping might get the best of you. Instead, take your time and look at various homes with different styles and prices. Find something that matches you, not the other way around.
“A home inspection is crucial to spotting any foreseeable problems.”
Not getting a home inspection
In a digital age, it is becoming increasingly common for first-time homebuyers to do all of their research online. This can lead to skipping over a final home inspection, which is extremely important. You want to have a professional look at the house and give you an estimate on not only if the pricing is accurate, but if the residence is in working order and if there are any foreseeable problems.
Don’t skip the home inspection. While your excitement might be pushing you forward and you want to just get the process over with as soon as possible, not obtaining a home inspection will work against you in the long run.
Assuming the home value will only increase
It is common for first-time homebuyers to assume their investment will only increase in the future, but that is not the case. Shifts in market affect the home values, but so do changes in neighborhood and demand. Additionally, this is true for renovations as well. Many young homebuyers assume that by renovating or modernizing their home they can instantly put additional value into it. As noted by The Globe and Mail, there are some renovations where this is not the case.
There are many renovations that could in fact do the opposite, such as putting in a swimming pool or constructing an elaborate master bathroom. While these ideas are luxurious and might entice a handful of future buyers, they require added upkeep. Likewise, even if renovations or additions improve the value of the home, it is unlikely that they will completely cover the cost of construction and maintenance. For example, a pool can cost anywhere from $10,000 to $100,000 to put in, not counting the maintenance it requires. These costs grow quickly, and when a future buyer comes to look at your home, these costs are going to be considered. Don’t put yourself in a position in which you have out more into your home that you can get back from it.
If you are a first-time homebuyer, take your time and get the house that fits not only your budget but your lifestyle. A home is a great investment and you want to get the most out of it. Also, each home comes with its own pros and cons. Take in every aspect so you can make an informed decision, and avoid the common mistakes of so many first-time homebuyers.