It happens every day. First-time homebuyers, partly due to enthusiasm,
partly due to ignorance, make costly mistakes during the home buying
process, like buying more house than you can reasonably afford. To help you keep your sanity and your cash, become an educated
consumer and avoid the mistakes that others have made before you.
Mistake #1: Not planning ahead. From the moment you think about
buying a home, start planning. Home buying is a time-consuming and
demanding process, and you need to utilize your management
skills early on.
Start by requesting a copy of your credit report. Carefully examine it for
errors, and clean it up before you talk to a lender.
Are you currently renting? Check your lease for an early release clause. If
you'll be subject to penalties, try to time your closing with the expiration of
the lease.
During this planning phase, consider your life over the next five to seven
years. Do you plan to start a family? Will an in-law eventually move in with
you? Will you be working from home? The number and layout of the rooms
you require will depend on your answers.
If you qualify for financing based on a dual income, will you be able to
survive on one salary in order to fulfill a long-range plan, such as one
parent staying home to raise a child? Once you've answered these
questions, establish a plan. Then direct the process with reference to the
plan. Don't let the process dictate to you.
Mistake #2: Failing to understand the home buying process.
First-time homebuyers need to ask questions. Lots of questions. So
choose a real estate agent who has experience working with the
uninitiated and is willing to explain the entire home buying process-from
viewing homes to negotiating, to financing, to escrow and closing-in detail,
and explain it again until you understand it.
Mistake #3: Getting in too deep. It can happen when homebuyers shop
outside their budgets or over-extend themselves. What can you do to avoid
getting hooked? Monitor your expenses for a couple of months. Then,
based on your findings, develop a budget that truly reflects your lifestyle.
Talk to a real estate agent who can provide insight into new home
expenses and taxes. Then revise your budget.
It's smart to ask your lender to pre-approve, rather than pre-qualify, you for
a mortgage. Pre-qualification only tells how much you can afford.
Pre-approval goes a step further. Your lender will thoroughly evaluate your
application-including verifying employment information and financial
disposition-then clear you for a loan of a determined amount. Having your
loan pre-approved gives you a sizeable advantage: Your new status as a
cash buyer makes you more attractive to the seller.
Once you learn how much of a home you can afford, stay within your
budget. Just because you've been approved for a certain amount, doesn't
mean you'll feel comfortable with monthly payments at the high end of the
range. Ask yourself if you can live with these payments. Do they fit your
established budget? If not, rethink your spending limit. Your new home
should give you great pleasure, not hold you hostage.
When you relay your price range to a real estate agent, ask to view
properties within that range only. By restricting yourself, you'll avoid
disappointment later on.
Mistake #4:Being ruled by the heart and not the head. Curb appeal
can be a powerful force. To counter its effect, you must be objective. Brutally objective.
Look at many homes, including an assortment of types of homes. When
you view a property, list the positives and the negatives. Recruit a friend to view the home and
provide you with objective feedback.
Also, think about how long you plan to own the house. Would it be difficult
to resell? List the negatives. Could you eliminate or reduce them?
Mistake #5:Buying into an unknown location. Don't stop your
inspection at the property line. Examine the surrounding area. Is it safe,
well maintained and moderately quiet? Is it convenient to work, schools
and shops? Ask about zoning and that lovely forest of vacant land across
the street. Could the highway nearby be widened in a couple of years?
If you're not familiar with the area,
ask friends and colleagues about it. Do your research.
Mistake #6: Signing without understanding the financing. Here's
where it helps to be a quick study. First-time homebuyers have to contend
with an assortment of mortgage types and the associated jargon. Your
real estate agent can be a great resource.
Shop around and compare. When you decide on a lender (a bank, your
credit union, or a mortgage lender) and a mortgage, get every detail in
writing, in particular, the lock-in rate, points and fees. And request a copy
for your file. You should also request an estimate of your closing costs,
which generally run between 3% and 6% of your loan. Inquire about
prepayment penalties. Have the lender attach an addendum to your
contract that specifies that no penalties will be imposed for prepaying the
loan. This step could save you a good deal of money.
Before you get to the table, read all the documents related to the purchase
of the property, and have a professional review them. You're signing a
binding, legal document. Make certain you understand the conditions of
the loan.
Learn from the mistakes of others. It's the best way to ensure a first-time
homebuyer a good night's sleep.
Call Mary Willenbrock for any help you need in buying your first or next home. Prudential Joy Tarbell Realty is
an independently owned and operated member of The Prudential Real
Estate Affiliates, Inc., a Prudential company. Equal Housing Opportunity.
