First-time home buying is definitely a nervous yet exciting time in anyone’s life because it is a significant milestone. Even during a pandemic, the 2020 statistics on home sales in the US are quite impressive. Despite this excitement, it can be an overwhelming task if you have little knowledge to guide you. Therefore, it is vital to know essential information to help you avoid common pitfalls that many first-time buyers experience. Do you want to know more about what mistakes to avoid when buying your first home? Take a look at these tips below.
- Not getting preapproved
Many real estate experts agree that a vital mistake commonly made by first-time home buyers is being too excited that they ignore their mortgage options. However, getting preapproved by your lender is an essential part of your home purchase that you must pay attention to because without it, you may not be able to buy at all. Even before you start viewing properties, get an agreement in principle from your mortgage provider. This “mortgage promise” shows how much you are likely to borrow, commonly valid between 30 and 90 days.
Your agreement, in principle, gives you a fair idea of your budget and also reassures your seller or real estate agent about your commitment, and most importantly, your ability to afford the property. Without this agreement in principle, you could lose your dream home because you will fail to secure the necessary loan to buy the property. Also, without a proper mortgage plan before buying, you increase your risk of getting gazumped by more prepared buyers. Gazumping rose from 13% to 36% in 2017, and it is still a widespread practice in the real estate market. Therefore, it would be prudent to consult expert mortgage advisors like Think Plutus to find the right mortgage plan that will help you secure your dream home ahead of other potential buyers.
- Neglecting additional costs
Apart from your initial deposit, there are many other expenses that you must sort out when buying a new home. So it is vital to budget for all these additional costs to prevent surprises. Stamp duty is one of the significant upfront costs you will have to budget for as a first time home buyer. However, properties costing up to $630,000 (£500,000) are exempt from this, so keep this in mind. Additionally, you may need to pay a valuation fee to your mortgage lender to assess your property’s value before you receive any money.
This cost typically lies between around $180 – $1,800 (£150- £1500), depending on the property’s value. You will also need to pay the home inspector a surveyor’s fee to assess the property’s safety. A basic home condition survey costs about $303 (£250) while a full structural assessment costs around $730 (£600) or more. Also, you will likely need a solicitor to sort out the legal details of your home purchase, and so it would be prudent to factor in legal fees into your budget. The cost of moving houses, estate agent fees, insurance, maintenance, etc., are all expenses you should expect to be fully prepared for.
- Not checking your credit score
Real estate experts liken your credit score to a “financial CV” that lenders assess to determine your creditworthiness before giving you money. As such, it is vital to maintain or upgrade your credit score if necessary to qualify for the loan that will pay for your house; a low credit score increases the likelihood of your mortgage application’s refusal. In the US, the acceptable credit score you need to have for your home purchase varies from lender to lender because of their differing approaches to risk assessment. Nonetheless, despite the lack of a set minimum credit score, several realtors agree that it must be high enough to convince your lender to offer you a mortgage. So, work on maintaining or improving your credit score before house hunting to ensure that you qualify to buy a home.
- Skipping home inspection
Many first-time buyers get so caught up with the home-buying process that they ignore one crucial quality check: home inspections. Multiple realtors advise that home inspections are a necessary extra cost for you because you can identify any outstanding issues with the property before closing. Therefore, hire an inspector to perform some quality checks on the property to ensure that it is up to standard.
Experts advise that you cover interior and exterior areas of the home to be on the safer side. For interior inspections, check the plumbing, electrical system, Heating, Ventilation, and Air Conditioning (HVAC), etc. Exterior inspections should cover the walls, foundation, roof, grading, etc. Aside from ensuring that you are buying a safe home that is worth your investment, home inspections can also be a contingency in your contract with your realtor or estate agent. This contingency helps you abandon any deal if you discover any significant defects during the home inspection, without paying any penalties. The assessment also gives you home maintenance ideas and possible costs, so always insist on a home inspection before committing to a property purchase.
- Becoming attached to a house
Many real estate experts say emotional attachment to a property is common among all home buyers, especially first-timers. While loving your potential home isn’t necessarily a bad thing, these experts advise that you should prevent it from influencing your decision-making when closing property deals. It is common knowledge that emotions often override sound judgment, so buying property based on feelings rather than facts can result in several undesirable outcomes afterwards.
Over-attachment to the property may cause you to be “too honest” with your agent, who may use your sentiment to manipulate the house prices for personal benefit. As such, overpayment is a common consequence of emotional attachment to a property that many first-time buyers are prone to. Also, sentiment can push you to engage in bidding wars that overstretch your finances. Additionally, you can be paranoid about missing out on the house, causing you to ignore essential factors like location, potential relocation, family expansion, etc. Therefore, try to remain calm and detached when buying a home to avoid making any rash decisions.