Buying your first home can be a scary, but exciting move in life. First-time buyers usually feel particularly stressed because they don’t know what to expect. The home buying process is complex and differs based on individuals’ situation. It’s not about knowing exactly what to do, but what not to do. Here are the five most common mistakes first time buyers make.
1. Jumping the gun
Don’t go home shopping before getting pre-approved. There are many advantages to mortgage pre-approval such as:
- Sellers won’t take your offer seriously without a pre-approval letter.
- Helps determine what you can afford
- Pre-approved mortgages close faster
- Minimizes financing problems during escrow
2. Going too big
Formulas and ratios are used to determine how much you can afford to borrow. Just because you can borrow the maximum amount, doesn’t mean you should. Lenders don’t know everything about you, such as if you plan on starting a family or an upcoming job or industry change. Keep in mind there may be more expenses down the road. Maintenance and repair fees, mortgage, taxes, and insurance should all be included.
3. Being an eager beaver
Love can be blind and for some buyers, they’ll ignore any warning signs just to buy a home. No matter how strong your desire to own a property is, buyers should never forgo inspections or other buyer protections. Even if your lender doesn’t require it, as a buyer you should always do an inspection and appraisal.
4. Letting your agent call the shots
Don’t let your agent choose your mortgage lender for you. They can offer recommendations, but the choice should ultimately be left up to you. Agents want to close quickly, which is a good thing, but costs may not be on their radar. If you care about costs and mortgage rates, get a few different quotes from competing lenders.
5. Getting cleaned out
Don’t spend your every penny on the down payment and closing costs. There should be an emergency fund in case of unexpected expenses. It is recommended that you have enough saved for two months of mortgage payments and if you’re self-employed, on commission, or in a troubled industry you probably need up to six months of savings.
Buying a home is an exciting experience, but if you avoid the above mistakes you should be in the clear.