1. Underestimating the process
Buying a home is hard. Buying a home in a seller’s market is even harder. The process of finding a house, getting an inspection, negotiating with the seller, and bidding against other buyers is a long one. Many first-time homebuyers are unprepared for the ordeal and soon find themselves exhausted and disheartened.
First-time homebuyers should expect their first few offers to get rejected. They should expect to compete with all-cash offers. They should expect to compromise.
2. Not securing a loan early
Buyers should talk with lenders early, and they talk to lenders-face-to-face. Homebuyers should meet with a lender and get preapproved for a loan before they begin their house search. And although online loan information is helpful, it will not take into account your specific situation. An in-person lender can.
To maximize your chance of getting a loan, minimize your debt. Lenders will scrutinize your debt-to-income ratio, so instead of buying that new car, pay off more student loans. Additionally, homebuyers should save as much as possible toward a down payment, and they should repair any problems with their credit. Shoot for a credit score of 720 or above.
3. Paying too much
A general rule: if a home falls just within your price range, don’t buy it.
A home comes with all sorts of additional costs that many first-time homebuyers fair to consider: maintenance, utilities, property taxes, and major repairs (those repairs are especially troublesome in older houses). Homebuyers should also prepare for unexpected life changes. What if a child enters the picture? What if someone loses a job? Play it safe and leave some financial wiggle room.
4. Skipping the inspection
A home inspection averages about $450, but that money can prevent a $4,500 disaster down the road. Every homebuyer should know exactly what he or she is getting into. This step in the homebuying process is technically optional, but it’s one corner that you Do. Not. Want. To. Cut.
At the very least, if you’re competing against a higher offer and need some sort of edge, find an agent who you trust who can perform an unofficial inspection for you.
5. Being Too Picky
Many first-time homebuyers are looking for their dream house. The perfect location, the perfect price, the perfect layout, and the perfect everything, down to the size of the bedrooms and the color of the carpet. But unless homebuyers can measure their income in the millions, they will have to make compromises.
Homebuyers should make a list of their top priorities and focus on those. Does a good neighborhood matter more than a huge backyard? If a house has the perfect square footage but is one bedroom short of ideal, which matters more?
Also: remember what can be changed. Wallpaper and carpet are not permanent. Location, however, is.