Affordable housing is hard to find, and buyers are desperate. Many are paying outrageous money for simple, modest-sized homes that they would not have considered a few years ago. They're buying what they can!
Indeed! Along with the hot home-buying market comes heavy competition, and many are making all-cash offers. Consequently, the financial stakes are high. So, know that the risks are significant and can lead to economic calamity if you aren't careful. Following are the five top mistakes often made by first-time homebuyers that you can avoid for an enjoyable and rewarding home-buying experience.
Buying a home is a big part of the American Dream. However, choosing to buy or rent is a consequential decision that affects your financial well-being and lifestyle.
And while the resounding advice is to buy if you can, there may be better financial conclusions for some, based on their unique circumstances. For example, suppose you'll only be in the house for a couple of years. In that case, buying may not make sense after you factor in closing costs and other expenses associated with buying a home.
But in the final analysis, know this. Renting doesn't always mean you're throwing money away, and owning only sometimes helps you build wealth in the long run. Return to Top
Additional expenses in purchasing a home can be significant:
And these are only some of the expenses of buying a home, and they contine after the closing with the ongoing costs of upkeep and maintenance of owning a home: pest control, lawn maintenance, homeowners insurance, trash pickup, water, and sewer service, tree trimming, homeowners insurance, pool cleaning, lender-required flood insurance (in some areas), and the like. Return to Top
A home inspection can reveal issues with a home that appraisals don't necessarily show that a buyer may find unacceptable. Examples include but are not limited to:
Heating/cooling system defects
Inadequate insulation and ventilation in the attic
Poor drainage around the structure
Electrical capacity & components
Steps and stairs
Consequently, and to make the point, not getting a home inspection is risky and potentially disastrous. Every buyer should get a home inspection before closing to know what they're getting into, whether it's a $200,000 home or one that costs $1,000,000! Return to Top
But that is not a given. Many home buyers think that if they dump their life savings into a home for a few years, they will magically increase those savings. However, sometimes the opposite happens.
Before, during, and immediately Post Covid, many homeowners ended up with underwater mortgages and found themselves owing more on the mortgage than their home was worth. As the economy improved, so did a return to the phenomenon of wealth accumulation through real estate holdings. Still, while home equity is excellent, it takes time and expense to access it. Return to Top
A lender considers this ratio when considering your ability to pay for a home. If you've accrued too much debt, you may not be approved. Show a history of saving – versus getting into debt before you apply for a home mortgage.
As a former real estate agent, I advised clients looking to buy a home to refrain from doing anything that would jeopardize their chances of qualifying for a mortgage. Things like
Will you need a mortgage to buy a home? If so, you must be the best loan candidate you can be. Return to Top
Suppose you're a first-time or novice home buyer. In that case, you must spend time with an expert, such as a trusted realtor, before rushing into the home-buying experience. They keep up with changes in current market values and how the various mortgage companies do business.
A realtor can also give you a reality check on home prices and values. Today, many home buyers rely almost exclusively on online sites such as Zillow or Trulia when shopping for a new home. While these are great resources, a person may get a false sense of the actual values of homes in the area. It pays to consult with a real estate agent.
Please keep an eye on your credit score before you apply with a lender. You're not guaranteed the loan even if you have a pre-approval letter. If your score changes significantly, you may find that you don't qualify just before closing. Don't let that happen!
Pay your bills on time, always, and avoid incurring more debt by purchasing a new car or opening credit cards. Switching jobs may also be a red flag for a lender, so don't consider that move until after you close and the house is yours. Return to Top
For Rent Image courtesy of Ivan Samkov at Pexels.com
Cost of Buying a Home Image by Nataliya Vaitkevich at Pexels.com
Home Appreciation Value Image by hywards at FreeDigitalPhotos.net
Woman With Credit Card Image by David Castillo Dominici at FreeDigitalPhotos.net