4 First-Time Home Buyer Mistakes to Avoid
Buying your first home can be both an exciting and overwhelming process. From finding a home that meets your needs to knowing how much you can afford, there are numerous factors that can end up leaving you more stressed than excited. No one wants to experience any regret over the biggest purchase they’ve ever made in their lives, so make sure you avoid these common first-time home buyer mistakes!
Assuming You Might Not Qualify
It’s common for renters to assume that they can’t buy a house now if they haven’t saved enough to pay a 20% down payment. However, while 20% is ideal, it’s not necessary. There are a variety of loan programs that cater to first-time home buyers, such as the FHA loan, which allows for down payments as little as 3.5%. Even some conventional loans allow for down payments as low as 3%. There are even VA loans for veterans and military or USDA loans for buyers in rural areas that don’t require a down payment at all! Also, many first-time buyers don’t realize that there are also plenty of down payment assistance programs that they could quality for, so be sure to talk to an experienced lender.
Getting Emotionally Attached
If you’ve just looked at a house for the first time and you’re already imagining your kids playing in the big backyard, then you might be too emotionally invested. Remember that buying a home is a business transaction. It’s likely the biggest purchase you will ever make, and it’s a decision that requires a clear head. If the decision becomes too emotional, you could end up paying too much for that home, so step back and think very critically.
When a mortgage lender takes you through the pre-approval or pre-qualification process, they’ll typically include the maximum amount they will lend you. However, just because a lender will let you borrow a certain amount doesn’t mean you should spend it. Buying a home will come with significant upfront costs, such as the down payment and closing costs, so you’ll want to make sure you have savings left for emergencies and other unexpected expenses after you close on your new home.
Underestimating Home Ownership Costs
First-time home buyers are typically very familiar with the cost of renting which usually includes a monthly rent payment, utilities, and any internet/cable bills. As a homeowner, however, you will take on a bigger financial responsibility. On top of your monthly mortgage bill, you will need to budget for property taxes, homeowners insurance, garbage pickup, utilities, and maybe even HOA fees. And don’t forget the costs of home maintenance! It’s recommended that you set aside 1-3 percent of the purchase price of the home annually to cover repairs and maintenance.
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