First-time homebuyers make mistakes going into the homebuying process, throughout the process and even after they purchase a new home. Because they’ve never done it before!
Here are 24 mistakes that I’ve observed and some tips on how to help rookie buyers avoid making them.
- Not knowing their true budget. Homebuyers should crunch their monthly numbers and know exactly what they can afford to pay each month toward their new home. No matter what their lender approves, they should stick to their determined budget.
- Not considering all expenses. Aside from the purchase costs, HOA fees and monthly payments, which real estate agents and mortgage brokers will advise on, homeowners should remember property taxes, utilities, maintenance, insurance and any renovations they’re planning.
- Not knowing what they want. Homebuyers should create a wish list and decide which features are “wants” and which are “needs.” Then they should shop with that list in mind, and stay as true to the list as their established budget allows.
- Getting sloppy with spending. In the months leading up to a home purchase, buyers should keep their spending minimal, pay all of their bills on time and refrain from making any major purchases!
- Not shopping around for a competitive mortgage. Buyers should research their financing options with multiple lenders to be sure they get the best interest rate. Half of a percentage adds up over the duration of the loan.
- Not shopping around for a good agent. Buyers should find an agent who they connect with as agents are their trusted advisers, and they should feel comfortable under their guidance. Buyers, do your homework, but most of all, make sure you work with someone you like.
During the purchase mistakes:
- Borrowing the maximum amount allowed by the lender. Just because a buyer’s lender approves him or her for an amount, doesn’t mean he or she should spend it. Tell your buyer clients: stick to your realistic budget, and shop within your means.
- Not trusting the agent. If the agent isn’t following up, is pressuring the buyer or is causing tension with other agents, buyers should fire them and move on. Buyers shouldn’t ever go around their agents and work with the listing agent nor should they sit on their hands waiting for an agent to get in gear. They should hire an agent who will guide them through the process.
- Not telling the truth. If buyers aren’t in love with the home, they shouldn’t pretend they are to avoid disappointing other people. The truth will come out eventually. Don’t waste everyone’s time. Just tell the truth!
- Having unrealistic expectations. It’s important to check off as many boxes as possible, but buyers shouldn’t hold out for the “perfect” home. It doesn’t exist. Buyers should stick to their list of top priorities, narrow down a few options, find one that fits best and make an offer.
- Moving in before they have an accepted offer. Buyers shouldn’t get carried away in dreamland. Until you have the keys, there are many things that can derail a purchase. Keep a level head throughout the process, and celebrate when you actually close escrow. Not before!
- Shopping with your heart. Buyers should take a step back and look at the home objectively. They should refer back to their checklist of the most important home qualities — do these match up with what this house has to offer?
- Not researching the neighborhood. Buyers should visit the neighborhood at different times of day, research the traffic patterns, review city plans and see what developments are in the works as well as learn about the community council, local schools and small businesses in the area. These all factor into the living experience of the neighborhood.
- Skipping the home inspection. “As is” properties may seem like a good bargain, but buyers should be sure to check the condition of the home. Repairs for a furnace, roof or a plumbing system could easily set them back several thousand dollars. Buyers should know what they’re getting into! A $500 inspection fee may save them thousands.
- Removing contingencies to be competitive in a hot market. If you’re competing against multiple offers, don’t give in to the temptation to remove all contingencies when submitting your offer. Without contingencies, buyers could lose money and even be obligated to purchase the home whether or not they actually want it.
- Not checking the HOA rule book. Homeowner’s associations are strict! Buyers should pay attention to the costs and regulations that are built into the home.
- Not reading the fine print. Homebuyers should understand what they’re signing when they’re signing it. The transaction paperwork is dense, but it’s there to protect them. As an agent, guide first-time buyers through the paperwork to make informed decisions.
- Not claiming tax write-offs. Homeowners have the ability to deduct their mortgage interest payments, built-in property taxes and the private mortgage insurance (PMI). The more recent your mortgage, the greater your tax savings.
- Buying furniture without a test run. Thankfully, technology is on our side. Homebuyers can use a virtual staging platform to get a realistic view of what furniture will look like before making a purchase they may not be able to return.
- Not bundling insurance plans. Home, auto and other insurances can be bundled together for maximum savings. Tell buyers to shop around and streamline their insurance plans after they purchase a new home.
- Only paying the minimum monthly payment. Buyers can save themselves time and money by paying a little extra toward their monthly mortgage payment. An extra $100 per month can save four years and $72,000 worth of payments on a 30-year, 6 percent interest, $250,000 mortgage.
- Not protecting the home. Home warranty, insurance policies and security systems are all vital to protecting a home and the people inside of it! Buyers shouldn’t skimp where it matters most.
- Not investing in their home while they still live in it. Homeowners shouldn’t wait five to seven years to start renovating or upgrading. They should be sure to keep up the condition of their home while they live in it and do upgrades along the way. It’ll make selling the home less of a major financial event.
- Not staying in touch with their real estate agent. Real estate agents are great resources. Even if buyers aren’t ready to buy or sell, an agent can help connect them with real estate related-professionals when they need a referral.
Mistakes are bound to happen. Hopefully, these tips will help first-time buyers minimize some of the roadblocks along the path to happy homeownership.
Sharron St. John is a real estate agent with the no. 1 KW team in the world, the Lucido Agency of Keller Williams Integrity. Sharron covers real estate, investments, and wealth building for Millennials. Connect with her on LinkedIn or Twitter.