11 Common Mistakes First Time Home Buyers Make
Deciding to purchase your first home is a big decision, one you are not taking lightly. Most people approach this milestone with caution because they know the responsibility of home ownership. Sometimes that caution can overshadow reason, the result can be a lack of action that is costly and frustrating. So I put together this article together explaining the most common obstacles a first time buyer faces.
Looking for a home before applying for a mortgage
This is a common issue, people are excited to look at homes and visualize themselves in them. But it’s discouraging when you spend time walking through beautiful homes and find out you cannot afford them. Avoid this issue by talking to loan officer first! This could save you a lot of trouble.
Talking to only one lender
As you know a home is a BIG purchase, it could be the most money you spend at one time in your entire life. So why would you not shop around for it? All lenders get their money from similar places, but what they sell it for can be drastically different. It’s important to shop for the best rate from different lenders.
Buying more house than you can afford
Buying a home is marathon, not a sprint. It’s easy to find yourself drawn to the higher priced homes, they are obviously more luxurious and have more features. But is that what you and your family need at this time? Home ownership is meant to build equity. You will then sell your current home and use this equity to purchase another, larger home that better suits your needs at that time. Remember that most people stay in their home on average 5-7 years. So when buying a home, anticipate your next 5-7 year plan.
Moving too fast
Bad decisions are made hastily. You never want to make a bad decision when it comes to spending money and regret it later. Buyer’s remorse is a real thing, so it’s important to assess why you want to buy a home and what home fits you best. Avoid making irrational decisions based on pressures. A good real estate agent and loan officer will be on your side and help you figure this out.
Draining your savings
I have had this conversation many times over with clients. I believe many people feel they can make a large house payment more affordable with a larger down payment. Partially this is true, but for the majority of first time home buyers it’s not practical. Consider that every $1,000 of a mortgage = $5.00 a month. You would have to put down about $10,000 to save $50.00 a month. Ask yourself as a first time home buyer, “Is $10,000 in my bank more important to me than $50.00 less a month?”
Being careless with credit
Another potential death sentence for any mortgage application. If you don’t pay attention to your credit very carefully during this process, it could cost you a home. If you have time I recommend reading this article “Tips to improve your credit”. It has some very good information on how you should handle your financials during a home purchase.
Fixating on house over neighborhood
Remember this while you look for a home: “It’s better to buy the worse home in a good neighborhood than the best home in a bad neighborhood”. Real estate is all about location, and good neighborhoods will improve in value, your house included. Neighborhoods on the decline will drag down home values and make re-sale harder. So you may find a better priced home in a declining neighborhood, but it won’t pay in the long run.
Making decisions based on emotion
Let’s face it, buying a home is a whirlwind of logic and emotion. Hopefully you can balance the two out and make the proper decision. That’s why getting pre-qualified is a good first step. This will not only tell you what you can afford, but a good loan officer will work out payments and price points according to what you’re comfortable with.
Assuming you need a 20 percent down payment
This is an old myth. You can purchase a home with no down payment ,and you can even avoid mortgage insurance at the same time!
Waiting for the ‘unicorn’
I have seen many buyers wait for that “special home” to come along, they know it’s out there and are patient enough to wait it out. But the cost of waiting exceeds the benefit. History shows that things become more expensive as time goes on, and the longer you wait to purchase a home the more mortgage rates will increase and the prices of real estate will increase as well. Remember “Equity”? That’s the goal in home ownership, remember that buying a home is a marathon, not a race.
Overlooking FHA, VA and USDA loans
We offer some incredible loan options, and FHA , USDA and VA loans are some of them. These loans can allow buyers to purchase more home at less cost because the rates are not as credit sensitive. Of course there is no “one size fits all” loan, but for many first time buyers that have limited access to down payments or have not built adequate credit, these loans are a viable option.
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Justin Scott
Loan Officer
NMLS 878581
- C) 920-530-4484
- O) 920-490-8823
- F) 920-490-8967
Executive Mortgage
NMLS 271650
909 . E Walnut Street
Green Bay WI 54301
