Monday, January 13, 2020 / by Ashleigh Townsend
When buying your first home, it is only natural to be excited about purchasing your first home. As exhilarating as the thought of buying your first home is, this is a major financial investment and the pathway is often fraught with costly mistakes that result in home buyers paying far more than they should for their homes. The ideal buy depends on a number of contributing factors, among which are: the ideal location, the right price, securing the best home loan interest rate and working with an expert real estate agent. Avoid these 6 common many home buyers make during the home buying process.
Not using a real estate agent
The role of a real estate agent is to simplify the process of finding a home that is well-known for being a complex and an overwhelming process for the unwary. Without proper and informed guidance, first-time homebuyers face an intimidating process from negotiating price agreement with sellers to deciding which mortgage interest rate would be best to spot potential issues with the property.
The numerous advantages of hiring a qualified and experienced real estate agent to help in the home buying decision process will offset the commission they earn. A local real estate agent will have invaluable knowledge of the neighborhood. This will come in handy in figuring out the future resale value of the property.
Skipping the home inspection
Often, major issues are not easily detected by untrained eyes. Home inspections play a vital role in determining how sound the foundations of a residential building is and to identify any major issues that a seller needs to fix before the sale can be agreed upon. A professional home inspector will know exactly what to look out for when it comes to a leaking roof or spotting water heater problems.
A relatively small fee of a home inspection is worth paying for, for peace of mind and to avoid a hefty price tag down the line. Generally, repairing unplanned issues such as water damage or cracked pipes is costly and a budget does not usually accommodate these unexpected expenses.
Forgetting the hidden costs of homeownership
Budgeting for a first home purchase is a lot more complex than just looking at the purchase price. Along with the monthly mortgage repayments, there are the hidden costs of homeownership that will apply. It is critically important that a potential buyer is aware of these unexpected additional costs before buying a home to avoid running into financial trouble later.
In addition to the principal mortgage amount and interest rate other financial costs that may apply include: property taxes, closing costs, utility bills, homeowners insurance, and maintenance and any appraisal fees that may apply.
Not shopping around for a mortgage
Choosing the first money lender buyers come across is an area that can mean a homebuyer ends up paying more for a property over the lifetime of the loan. By not comparing the different mortgage loans, lender terms and interest rates available from at least three financial institutions can mean homebuyers may miss out on saving thousands of dollars. A homebuyer may find deciding on loan offers a nightmarish prospect but the payoffs can be huge. The more money lenders a home buyer talks to, the better the opportunities will be to find the best deal at the lowest interest rates.
Not improving a bad credit score before applying for a home loan
It is worth remembering that the process of buying a first home starts long before the search for a property. Finances need to be in order. A less-than-stellar credit rating has direct financial implications for the home buyer who find that they end up paying higher mortgage rates than those with healthier credit scores. A one percent difference in mortgage rates may seem insignificant at first, but in the long run, a home buyer can end up paying up to $50,000 or more in interest alone.
Buying the wrong type of property
First-time homebuyers almost always have a limited budget to spend on a property and a fixer-upper with its attractive price tag may seem like a money-saving option when compared to a move-in-ready home. The reality can turn out to be very different. The norm is for buyers to have deep pockets and an indefatigable amount of patience.
Home improvement shows make home renovations look easy. Without industry experts and huge teams working behind the scenes, the average homeowner is exposed to the numerous pitfalls of do-it-yourself renovations that include running over budget, the strain of related stress on self and on relationships, shoddy workmanship and unexpected delays.
The learning curve of property buying can come as a huge shock to many who dream of owning their own homes. By being aware of some of the mistakes made by many first time buyers, and taking steps to avoid them, one can prevent feelings of buyer’s remorse and secure a solid property investment.