Common Mistakes Made by First-Time Home Buyers
So, you have finally decided to buy your first home. I'd like to commend you for making that decision, but I'd also like to highlight some common mistakes made by first-time home buyers, hoping that it will help you save some money and prevent unnecessary headaches.
Not Getting Pre-Qualified
A common mistake is not getting pre-qualified for a loan from a local mortgage officer or a lender. Sometimes people don't get pre-qualified because they're worried about what they will hear, or because of their concerns about their credit or their income. People also don't get pre-qualified because they're so confident that they have good income or good credit that they think that there won’t be any problems with getting qualified and they skip this step up front.
You don't want to do that for several reasons. One is that there are a ton of different loan programs available in this market. There are programs available that allow you to not put any money down under some circumstances if you qualify for them. Some programs are short term, others long term. There are very low fixed interest rates right now for a lot of programs, but different programs also have different requirements about where you can buy or the kind of condition the home has to be in, and it's important to be aware of these things up front. A good letter will also give you a general idea of what your payments are going to be at the different levels. You may be qualified to spend substantially more than you really want to based on what you want your monthly payment to be.
Never feel embarrassed to talk to a lender. They have seen it all, and a good lender may even be able to provide some great tips on how to improve your situation if for some reason you don't currently qualify for a loan.
Going In Alone
Some buyers don't want to pay for an agent. Well, in several states typically the sellers cover all the costs of the commission, so you're turning down a free service. Sometimes people think they will get a better deal if they don't have their own agent. Usually, that is not the case. It is the listing agent's job to get that seller as much money as possible for their property. That's what they're being paid to do, so having someone represent you in your best interest is very, very important.
There are things that you're going to ask for in these negotiations, whether it's during the inspection or upfront, which you need to carry out. Not having your own agent can be compared to not having your own lawyer and going to court expecting the other person's lawyer to work for you too. The semantics just don't work. You need your own representation if you're going to make sure the things that you negotiated get handled like you want them to be handled.
Not Asking for Recommendations
Talk to your loved ones. Talk to your co-workers. When you're looking for a lender or when you're looking for an agent, it's an excellent idea to see what kind of reputation someone has. You can check online reviews, or you can talk to people that you see online asking for recommendations. Any good agent or good lender will have people who are ready and willing to tell you what a great job they did for them.
Not Getting a Home Inspection
Some buyers skip this step because they're worried about the cost. A home inspection is going to cost a few hundred dollars, so it's really not that substantial of an expense when we are talking about making a hundred-thousand-dollar or a million-dollar purchase. Buying a house is probably one of the biggest investments you're ever going to make in your life, so protecting that investment for a few hundred dollars is a crucial step in the process. Sometimes buyers don't get a home inspection because they know a lot about construction; however, when you're the one buying a home it's a very emotional experience. It's very easy to miss things even if you have a very strong construction background, so bring in a third party who's going to spend two or three hours looking at everything in the house. Trying to make sure that all of the major systems are in good working order is an excellent way to protect yourself. It also facilitates things if you end up doing an amendment to address concerns, or when you ask for things to be repaired and you're trying to negotiate the price. Having documentation from a third-party is not part of the transaction and it's unbiased. It helps tremendously with that.
Having Too Much Faith In Online Home Values
First time home buyers have a tendency to put too much confidence in online home values. There are a lot of excellent websites out there that have all sorts of information for potential homebuyers, and most of it's good. However, there are online home value tools that typically just pull homes that have sold within the immediate vicinity in the last six months to a year, but they don't look at the condition of the homes. One house might be waterfront; one house might not be. Those aren’t comparable sales, but the computer doesn't know that. One house might need seventy thousand dollars worth of work while another might be immaculate ready and have every upgrade available. These are also not comparable sales. Some neighborhoods are built in phases and one section of the community might be 15 years newer than another section and may have bigger lots or more features. All of this has to be considered if you're going to give a proper value to a home.
A good real estate agent is going to help you when you're thinking about making an offer on the house and will look at everything that has been sold in the last three to six months in that neighborhood that is actually comparable to the home that you are interested in. They're going to help you figure out what a fair offer is and will help you get the best deal possible.