There are few things in an adult’s life that are as exciting as purchasing a home for the first time. The problem is that, in the midst of all that excitement and running around, it’s extremely easy to become blinded by a beautiful kitchen, a living room with high ceilings or a wonderful backyard with a built in pool. In many cases these beautiful luxuries can compel someone to purchase a much larger home than they can’t afford, and make many other mistakes that end up costing them a lot more money in the future.
If you don’t want that to happen to you, keep reading below to learn about common mistakes that first time home buyers make and how to avoid them. Enjoy.
The first, as we already mentioned, is Overspending. The fact is, before you even begin to look at homes you need to know exactly the amount of money can afford for your mortgage and home insurance payments. If you look online there are plenty of websites that have calculators that you can use to do this, but looking at your current expenses and using them as a base for your spending is a good idea as well. If you’re already struggling to pay the rent at $800.00 a month, there’s a good chance that spending $1200.00 a month on a mortgage payment is going to be difficult.
Your best bet is to meet with lender first and find out exactly what amount of money they will pre-approve you for. Then, lean towards a lower amount rather than a higher one because, frankly, you don’t have to use the entire amount that you might be preapproved for. Once that’s done, it’s time to start searching for the home of your dreams.
Another big mistake that many first-time homebuyers make is forgetting to account for things like property taxes, homeowners association fees, closing costs and homeowners insurance. If you think about it, when you pay rent on an apartment the only thing you usually pay is rent and, in some cases, renters insurance. When you buy a home the monthly mortgage payment you have to make is only the beginning of a wide array of different costs that will be coming due monthly. If you fail to take those costs and payments into consideration, you might find yourself with monthly bills that are higher than you can afford.
Many also mistakenly figure out how much mortgage they can afford to pay based on the income that they believe that they will be earning in the future. For example, students graduating from law school will sometimes purchase a huge home believing that they will land a great paying job at an attorney’s office and, when that doesn’t happen, they face huge financial difficulties. The same thing can happen if you count on your husband to get a big promotion that never happens. The simple fact is that no one can predict the future and, even if your ship does come in in a year or two, you shouldn’t count on it pulling into port.
Finally, one big mistake that many people make is that they don’t protect themselves with home inspections and contingency clauses. As the old saying about “let the buyer beware” is very acutely true when purchasing a home. Many of them look fantastic on the outside but, under the surface, are a huge mess that will quickly drain your money in repair bills, replacement costs and so forth once you’ve made your purchase. Home inspections protect you from many of these things but getting a contingency clause is actually a better form of protection.
Justin Lopatin, a mortgage planner with American Street Mortgage Company Co, says that “A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in over the purchase price. Should one of these events occur, the buyer gets back the money he [or she] used to secure the property. Without the clause, he [or she] can lose that money and still be obligated to buy the house.”
Now that you know about these mistakes you are much better prepared to go out and purchase your first new home. Best of luck!