What First Time Homebuyers Should Avoid When Buying a Home
You’ve finally saved up enough money for a down payment, and now you’re ready to shop for your very first home. Lucky you, the MLS is full of affordable houses that say they are “great for a first time home buyer.” But what does this really mean? This is a tag that is often applied to inexpensive houses, sometimes without consideration for what a first time home buyer can really handle. Here are some of the biggest hazards you need to avoid when buying a home.
Shopping without a Pre-approval
A pre-qualification letter is not as good as it may seem. Oftentimes, banks send out pre-qualification letters for advertising purposes, promising much better deals than you can actually get approved for. Before you begin shopping, make sure you talk to a bank and get a real pre-approval letter. It will be based on your personal income and debts and will give you a solid price range to shop within. This process may take a few days, but when it is time to make an offer on a house, you will be asked to provide a pre-approval as proof that the offer is legitimate. Taking care of this in advance will save a lot of time for you and your agent, and ensure that your offer is submitted in a timely manner. If you are unsure of where to begin, there are many guides online that will tell you what information you need to have in order to get your pre-approval letter.
Buying Too Much House
Even though the bank pre-approved you for a boatload of money, it doesn’t mean you need to spend every penny. There are a lot of additional expenses that come with owning a home, including property taxes, repairs, HOA dues, and insurance. Not to mention, utilities for a house are generally higher than for an apartment. The bank is using a golden ratio based on your credit report to determine what you can afford, but only you know if you are about to go into slow season at work, or if you need to buy a car in the near future and will have extra payments. Buying a smaller house with a more manageable payment is a good way to protect yourself against the unpredictable nature of life.
Likewise, if you are buying a first time home buyer fixer-upper special, you need to be very realistic about what work you can do yourself, and which work you will need to pay somebody else for. You don’t want to end up with a house that is uninhabitable with no way to pay for repairs.
The home buying process takes time. Sometimes the house you’re looking for just isn’t on the market yet. If you are shopping during a slow season with low inventory, it can take a lot longer than normal to find the right house. Of course, you also need to have reasonable expectations going in. Your agent should inform you if s/he believes that your expectations are unreasonable or need to be changed. However, if a house simply won’t work for you, you shouldn’t settle just to get the deal done.
Buying a home can be extremely stressful as a first time home buyer, but the more planning and preparing you do in advance, the more options you will have. From the moment you start thinking about buying, you should work on researching your area, learning about lenders, and seeing how the market looks near you. This will help you set your expectations, decide on the features that you’re most interested in, and get pre-approved for a number that makes sense for your situation.