Home buying is a monumental decision and one that should be approached sensibly. According to the National Association of Realtors, just over 80 percent of first-time home buyers ultimately succeed in purchasing their dream home. However, there are some mistakes that excited new homeowners make, which eventually hamper the experience. When buying your first home, you must avoid making the following mistakes.
- Over Spending
Budget is something you must consider before buying your first home. You are excited about the place but don’t have the financial backing; this would strain your finances and prevent you from adding extra features. Mortgage payments shouldn’t exceed 28% of your monthly income. If you have extra debt, this ratio should be lower. Your estimates should be based on current income, not anticipated future earnings.
- Not Studying Mortgage Procedure
To determine your mortgage eligibility and interest rate, your lender will review your credit and debt-to-income ratio. A lender will request a copy of your tax returns, pay stubs, and bank statements. This helps them to protect their property against bad debt or default on payments.
- Not Securing a Preapproval Letter
The housing sector is competitive; you have only days to close the deal, or someone else will buy your dream house. A pre-approval letter is a confirmation that the buyer has the financial means to clear the dues and payments of the property. The seller or lender will also prefer buyers with pre-approval letters.
- Skipping Initial Inspection Altogether
Always take a professional inspector for an initial inspection of the property. A professional inspector will notice things we don’t. Unfortunately, this is a common mistake made by new homeowners who then spend an extra amount repairing the damages.
- Not Taking Closing Costs into Account
Aside from the down payment, closing costs can be substantial when buying a house. These costs, including attorney fees and title insurance, must be paid when signing the mortgage loan documents. Additionally, it would help if you planned closing costs to be between 3 and 5 percent of the price of your home.
- Not Planning for Foreseeable Extra Costs
On top of your monthly mortgage payment, you must pay real estate taxes, homeowners’ insurance, and upkeep charges. Additionally, you may have to pay HOA or co-op fees, depending on where you live. Besides these legal costs, the house needs constant renovation, which depending on its size, will cost you accordingly. Buying your first house is only the beginning; paying legal fees and taxes and maintaining it is the actual job.
The tips above should help you avoid first-time home buyers’ most common pitfalls. But there are hundreds of steps to buying a home, and some may be more important to you than others. Learning from mistakes is the best way to find what works for you. So stay organized, keep your priorities straight, and do your homework before leaping into homeownership. Remember, there is a lot to learn about being a homeowner; it’s not as simple as walking into a house, paying up and making it your own.