What are the 10 Mistakes of First-Time Home Buyers?
1. Not knowing how much house you can afford.
Maybe you've seen the shows on HGTV with a huge eat-in kitchen, nice granite countertops, chef quality appliances, and all the bells & whistles. When you get out looking you may end up at the top of your price range, but still disappointed in what's being offered on the market. Realize that you need to know what price range you can afford and then look at what homes in that price offer. Make sure you get pre-approved prior to looking. Don't even know someone to talk to in regards to financing? Ask your Realtor. That will probably be one of their first questions anyways, "Are you pre-approved?"
2. Assuming foreclosures are great deals.
Just because the previous owner owed more on the home than what it's listed for before the bank took it over doesn't mean it's worth that much now. Have your agent check the comparable homes in the neighborhood. Check the police reports for crimes in the area, this will give you a good idea if the neighborhood is also on a downward slope.
3. Letting your true feelings show.
So, you found the home you love and you are willing to pay the asking price or more. If you are working with an agent on the buying side, then it's ok to tell them you really want this home. That way they can let the selling agent aware of interest and if other offers come in you will be made aware as well. You don't want to tell the selling agent how you feel about the home, or else you will end up paying your top dollar.
4. Failing to find a good buyer's agent.
Your agent has a fiduciary responsibility to you as their client. Rely on them for their knowledge of mortgage loan officers to help you get pre-approved. Your agent should also know loan officers in the business that specialize in they type of financing that you need.
5. Underestimating the costs of owning a home.
Make sure you set aside at least 1% of the purchase price of the home for incidental repairs that may occur over your period of ownership. Since you are a first time buyer, and will have to spend money on new items for the home, your agent should ask for a one year home warranty when writing the offer so that you know if anything major occurs in the first year, you will be covered and only have to pay a small deductible. If you want to extend the warranty, you will have to extend that with the company directly.
6. Failing to budget for property taxes.
Every homeowner has to pay them, it's just the amounts that are different. Make sure you know prior to writing an offer if the home has a Home Owners Association. If so, then you will have to pay a yearly fee to the HOA in addition to the property taxes. Instead of paying one large sum of money out for the taxes once a year, ask your mortgage lender about having the taxes included in your monthly payment.
7. Assuming your first offer will get accepted.
Just because it's a buyers market, doesn't mean you can get the home for dirt cheap. You are still buying an investment. Seller's have their home priced at what they expect to start the negotiations. If they are reasonably priced then don't give them such a low ball offer that it offends them. Maybe the home needs some major repairs; get some quotes for these and send them in with the offer. That may help the seller come down in price a bit. Just like you may not want to pay full price for the home, the sellers don't want to sell the home for an unreasonably low price.
If the sellers are priced right and it's getting a lot of activity, then consider making them a very good offer. This will make the neogiating process go a little bit faster and help you to get the home before someone else does.
8. Skipping the inspection.
Never, never, never buy a home without knowing what work it will need. Even if the home is sold as-is, have a licensed inspector check the home for major/minor issues so you know what you are facing if the deal does go through. If the home is a "regular" sale, then make the contract contingent on inspections. That way if you find a few issues that need fixing, you can send a request for repairs to the sellers asking them to fix the items on the list that are of most importance to you.
9. Doing too much too fast.
Don't overextend yourself when looking or buying a home. After you get an accepted offer, don't run out and buy lots of large appliances or open more lines of credit. This may not only overextend your current bank account, but it may also cause you to no longer get financing. When you are pre-approved, that is based on your accounts and income as of that day. The less you go splurge, the better. I have recently heard of a pre-qualified buyer that got an accepted contract on a home, went out and bought a new refridgerator, and then found out, because of that purchase he was no longer qualified to buy. Ouch!
10. Failing to include a contingency clause in the contract.
Make sure your agent puts an inspection contingency in the contract. Also, make sure that your agent protects you with a financing contingency, so that way if the interest rate shoots up overnight, you do not have to buy the home unless you are ok with the new rate.