There’s always a first time for everything, and that includes buying a house. And with first-time experiences often comes some mistakes made along the way. But given the magnitude of a home purchase, this is one experience you don’t want to mess up.
Here are a few lessons that all first-time homebuyers should learn well before taking the plunge into homeownership.
1. Start Saving Early
Obviously, buying a home is a hugely expensive purchase, so the more money you can come up with to be put towards this transaction, the better. It’s never too early to start saving for a home, even if it’s not something you plan to buy for years to come. If you want to afford a home purchase, you’ll need enough funds to come up with a down payment. And if you’re able to save at least 20% of the purchase price of a home, then you can avoid paying Private Mortgage Insurance (PMI).
Aside from a down payment, there are also a ton of closing costs to cover, so any money you can save early on will come in really handy by the time you’re ready to buy.
2. Get Pre-Approved For a Mortgage
In order to find out how much you can actually afford in a home purchase, it would be wise to visit a mortgage broker to get pre-approved for a home loan. This will help you focus on homes that fall within your price range. Not only will this help you avoid disappointment when you find a house that you love, it will also make you more favorable to sellers, especially if the competition is fierce among buyers.
3. Try Not to Spend Up To Your Approved Maximum
Just because your lender approves you for a specific amount of money does not necessarily mean that you should spend that entire amount. While your lender will take into account your income and debt load, they don’t factor in how much money you spend on other things in your life.
By purchasing a home that’s priced within your upper limit, you could be left with a shortage of funds to be used for other expenses, including your groceries, utilities, entertainment, and retirement savings. To avoid becoming “house poor,” consider spending much less than what you’ve been able to get approved for.
4. Make a List of “Needs” Versus “Wants”
You might have a clear idea of exactly what you want in a home, but are these actual necessities? If you’re on a budget, it may be necessary to compromise when buying a home, as finding a property within your price range that checks off everything on your list might be a challenge.
As such, you’ll need to be realistic about the characteristics on your list compared to what your budget is. Try to keep your “needs” versus “wants” separate, and take this list with you when you visit properties on the market. Pay attention to the types of homes and their traits that fall within your price range, which will help you identify what you’ll be able to find with what you can afford to spend.
5. Don’t Rush Yourself
Buying a home is a big purchase, so you definitely don’t want to rush into anything. There are so many things to consider when shopping for a home, so you’d be well-advised to take your time and look at several homes before making a purchasing decision. Even if you lose out on a home, there will always be another one out there. The last thing you want is to experience the dreaded “buyer’s remorse.”
6. Don’t Leave Out Important Contingencies
Your agent will suggest that you include specific contingencies in your offer, and you’d be well-advised to heed their advice. While some contingencies are not always necessary and can even complicate real estate deals, others are very important. More specifically, financing and home inspections are crucial contingencies that will protect you in case you cannot secure a mortgage or if there’s a problem with the home, respectively.
Unless you’re paying in all-cash or are planning to tear down the home, these contingencies can offer you a means to back out of the deal. And if you’re buying a home in an HOA community, including a contingency that allows you some time to review the HOA’s documents is also important.
7. Be Present at Your Home Inspection
As already mentioned, a home inspection will give you the chance to find out if there is something wrong with the property before you take possession. If there’s an issue that you were not aware of before, you can either request that the seller make the necessary repairs, or at least pay for them. Alternatively, you may also go back to the negotiating table to reduce the price, or even walk away from the deal altogether.
But just because you have a home inspection done does not mean that you shouldn’t be there. By being present, you’ll have the chance to see first-hand what problems may exist. It will also give you the opportunity to ask any questions you may have instead of waiting for the inspection report to come in. You’ll find that this will be a very educational experience.
8. Work With a Seasoned Real Estate Agent
Agents do a lot more than just show buyers a bunch of homes and draft up an offer. There is so much work that’s done behind the scenes, and there are plenty of things that are done after an offer has been accepted.
There’s no reason for buyers not to hire a real estate professional since commissions are typically paid by the seller. Real estate agents will help you find properties that meet your requirements, negotiate to get the lowest price and help you after you take over the title. Before you begin your search for a home, be sure to team up with a professional agent who will keep your best interests in mind at all times and ensure a successful transaction.
The Bottom Line
If you’re new to the homebuying game, you’ll certainly want to team up with a professional real estate agent who can guide you in the right direction and help you avoid making some costly mistakes. Buying real estate can be a complex endeavor, but with a seasoned agent in your corner, you can learn a thing or two and ensure a smooth and seamless transaction.