Buying your first home can be downright frightening, especially if you don’t have anyone to guide you. Unlike any purchase you’ve ever made, real estate will be the most expensive and rewarding (if done the right way) investment you will make.
The best way that you can ensure your purchase goes smoothly is to use a team of experts. These include:
- Buyer’s Agent
- Real Estate Attorney
- Mortgage Advisor
- Home Inspector
Unfortunately, it can be tough always to find the right experts. If you don’t use someone like our team, you might make some mistakes. Here are four ways in which first-time homebuyers make costly mistakes when it comes to buying a home.
Not Having A Buyer’s Agent
Before Starting Your Search
The most common and detrimental first-time homebuyer mistake that most families make is not using a buyer’s agent, especially early in the process. As you begin to search for homes, you will meet many real estate agents/realtors®, but most will represent the property’s sellers.
When an agent represents the seller, it’s their contractual obligation to negotiate the best possible price for their property. Regardless of how nice they may come off, they can use any information you share with them during the negotiation process. Find your buyer’s agent before you start your home search.
During Your Search
Realtors® will be able to help you find the right property much quicker than you will by yourself. Not only do real estate agents have access to their MLS (which contains all active listings in real-time), but they can often leverage their relationships to find “off-market” properties that are not yet live on the MLS.
Hiring an agent will also save you time during the search due to their market knowledge. If you are clear about the exact home you want, they will know which properties/neighborhoods to avoid based on their time as a realtor®. Using a buyer’s agent will help you navigate the search without wasting any more time than needed.
Getting Under Contract
Unless you understand real estate contracts inside and out, attempting to go under contract is one of the most critical times for you to have a buyer’s agent on your side. Your agent will help you structure the offer so that the sellers may choose it over other offers. In a competitive market, it pays to use an agent who knows how to make an offer look enticing instead of just offering thousands above asking.
Your realtor® will also help you structure your contract in a way that is safe for you when purchasing the property by using contingencies. These are certain conditions that have to be met for the agreement to become legally binding. These contingencies can include:
- Loan contingency
- Appraisal contingency
- Home inspection contingency
- Sale of a prior home contingency
The way these contingencies are worded can have an impact on how your contract is enforced. Using a licensed realtor® allows you to sleep well knowing that you are safe during your homebuying process.
Not Having A Nest Egg
Not having some savings or burning through all of it is a common mistake for first-time homebuyers. While buying a home can be a significant upfront investment, it’s essential that you don’t spend the entirety of your funds on purchasing your home. Keeping a nest egg can help keep you safe without having to get into large amounts of credit card debt.
If you plan to put more than 10% down on a home, it may make sense to bring less cash to close and opt to keep the savings instead. Have your lender look at the numbers and see how this would impact your monthly payment.
Trying To Time The Market
Another common mistake of first-time homebuyers is trying to time the market. Whether you think we are due for a drop in interest rates or purchase prices, the reality is that nobody has a crystal ball and can predict the market.
While many lenders use different data sources, and it points towards the housing market becoming stronger, anything (and we mean anything) could happen. The only certainty is that markets go up and down and that people will need somewhere to live.
If you are trying to time the market, you could get priced out of the market. Instead, focus on buying when it makes the most sense for you and your family (especially if you have time on your side to ride through any dips in the market).
When you understand that real estate, just like anything else, has risk involved, it allows you to look at it from a statistical point of view instead of emotional and make intelligent decisions for your future.
Asking Only About Maximum Loan Amount
The final mistake first-time homebuyers make is that they don’t think about their monthly cash flow. Depending on the type of income you use, you may be qualified off your gross income. This means that it doesn’t consider the other items taken from your paychecks, such as taxes, insurance, and retirement.
Depending on your monthly debts, you may qualify for well above what you can afford to pay monthly. Many borrowers will ask what’s the most they can be eligible for because they want to afford a home in their market. Instead, focus on the monthly payment and determine if you will have enough to continue your current lifestyle while making intelligent decisions such as contributing to your savings or 401k account.
If you are a first-time homebuyer, the list of possible mistakes is endless. While you can spend hours pouring through online resources, the reality is that unless you have a seasoned professional in your corner, you are more than likely going to make some mistakes. Click here and speak to a mortgage advisor who can help you get started today.