Buying a home is a major investment for many people. Find out what are the mistakes that first-time homebuyers should avoid making when they buy a house.
Even with the limited supply of homes in the market, US home sales continue to increase in the middle of the pandemic. This comes as home prices have also increased over the past year as the demand for homes also increased.
Even as some interested buyers are buying a second home, many are still first-time homebuyers. This means they do not know the mistakes they have to avoid before finalizing their purchase. Here are the mistakes that first-time homebuyers should avoid.
Not Getting a Pre-Approved Loan
Since there is a limited supply of houses in the US market, homebuyers compete with each other to purchase the homes that they want. This is particularly true for affordable housing, which pushed prices higher. The situation also compelled sellers to focus on people who were serious about buying their homes. These buyers typically have funds or a loan ready for them to buy the home.
With this, you should get a pre-approved mortgage loan before you go out and look for a home. A pre-approved loan increases your chances of getting the home you are eyeing since it shows the seller you are serious about buying the house. If you do not get a pre-approval, the seller may think you do not have the money to buy the house and might not take your offer seriously.
Getting a pre-approval also allows you to know the price range of the homes you should look at. Due to this, you will save time and effort in looking for a home that you can afford. So, first-time homebuyers should get a pre-approval before they start house-hunting.
Going Beyond Your Budget
It would be best if you also stayed within your budget or look for a house that you can afford. While you may want to stretch your budget to get the home that you love, you should avoid overextending yourself to avoid financial issues in the future.
This is where a pre-approval is helpful since the lender will check your income, assets, credit rating, and employment status. The lender will ensure you have enough money to repay the loan. It means you should stay within your budget if you’re going to take a loan for the house.
You should avoid buying a home beyond your budget since you would not want to risk foreclosure in case you lose your job or have to pay for a major operation. Keeping within your budget allows you to have funds for other expenses, such as utilities, property taxes, maintenance, and other bills.
Being Emotional in Decision-Making
When you decide to buy a home, you may become emotional when you see one that catches your eye. While a home is a place where you make memories, you should avoid getting too emotional when buying a home.
The current real estate market is a seller’s market due to the huge demand and limited supply of homes. In this situation, buyers are making bids for homes that they like. On the other hand, sellers are taking their time evaluating the bids and will likely accept the highest bid for their property.
When you are emotional in your decision-making, you may end up going beyond your budget. A home is a major investment, and you wouldn’t want to lose it because you went beyond your budget and you cannot keep up with the monthly payments. You should stick to your budget, and if the price goes beyond that, you should look somewhere else.
Overlooking Hidden Expenses
Aside from the cost of buying a house, it would be best if you also considered the hidden cost of owning a home. The hidden expenses of owning a house include property taxes, homeowners’ insurance, homeowners’ association fees, mortgage insurance, maintenance, and repair.
Due to this, you should set aside a budget for these expenses. Without a budget, you’ll end up losing a good amount of your savings to keep up with the payments. You may even end up losing the property in the future due to the non-payment of your bills, which is something you want to avoid.
You can ask your agent to help you know the exact figures for the taxes and insurance. You can also look for several providers to allow you to compare rates. It is always important to consider these expenses and set aside a contingency fund in case you overlook something. For home maintenance, a good rule of thumb is to set aside one to three percent of the home’s value for these expenses.
Even as people look forward to buying their first home, they should avoid making first-time homebuyers’ mistakes.