Buying a house is a thrilling experience, but it can also be overwhelming – especially for first-time home buyers. Set yourself up for success and start preparing with some real estate knowledge.
We know all the ins and outs of this process, so we’re here to help. Let’s break down five common first-time home buyer mistakes and how to avoid them.
How To Avoid These 5 First-Time Homebuyer Mistakes
While some first-time home buyer mistakes aren’t a huge deal, some can become a big issue, leading to unwanted delays and financial problems in the long run. Here are 5 of the most common mistakes we see and how you can avoid them.
1. Not Starting the Approval Process Early Enough
Shopping for your new home is exciting, and it’s easy to get ahead of yourself. Before you jump the gun, it’s key to get your initial approval, also called mortgage preapproval.
So, what’s so important about getting preapproval? For starters, it’s the most accurate way to determine how much house you can afford. You’ll get preapproval through a mortgage lender, and they’ll give you a reasonable price range to stay within. Plus, being preapproved makes you significantly more attractive to sellers because they know you’re serious about purchasing, which will help you when it comes time to enter a bidding war.
It’s also crucial that you don’t confuse the terms prequalified and preapproved. Some lenders can offer you prequalification, but it’s simply an initial estimate of what you’ll probably be able to afford. It doesn't give you the financial backing that mortgage preapproval does.
2. Only Taking One Mortgage Rate Quote Into Consideration
Getting a mortgage quote can seem daunting, as you have to find a qualified lender, provide financial documentation, and wait for them to create the quote. However, this process shouldn’t be overlooked or rushed, and doing it more than once with multiple lenders is beneficial.
Relying on one quote from the first lender you visit might seem more manageable, but it’s not always cost-effective. Other lenders could offer you a better deal that will save you money over the lifetime of the loan. It’s vital to compare quotes and consider various factors, such as specific rates and terms of the loan.
3. Draining All of Your Savings
It’s no secret that investing in real estate is expensive, and it’s essential to save up as much money as possible for your down payment and closing costs. However, that doesn’t mean we recommend draining your savings account when it comes time to purchase.
Here’s the deal: When homebuyers put down at least 20 percent of their down payment, they won’t have to pay for private mortgage insurance. Yes, this can translate to significant savings on your monthly mortgage payment, but it’s a risky move to be left without any savings at all.
We recommend having three to six months of living expenses saved up in an emergency fund after you close. Don’t deplete your retirement account, and don’t spend your last penny and put yourself at risk in the future.
According to data from Attom Data Solutions, the average down payment for a home is 6%. If you can afford to put down 20%, that’s fantastic, but nothing is wrong with that 6%, either. Talk with your financial professionals and establish what’s best for you in the long run.
4. Opting Against a Home Inspection
Did you know that home inspections cost an additional fee? The average cost for a home inspection in Michigan is $300-$500, and while this can be costly, that doesn’t mean that we recommend you skip this step.
Sure, you might do a walkthrough of the property and see nothing substantially wrong with it, but more than likely, you aren’t a professional in this field and don’t know exactly what to look for. Often, the home could need repairs that aren’t obvious to everyone, and they could cost you thousands of dollars down the road.
Hire a qualified home inspector to evaluate the property. They’ll give you a report with any potential problems, and you can use this to negotiate a lower purchase price or try to get repairs included in the transaction.
5. Choosing Not To Hire a Real Estate Agent
You might be under the impression that hiring a real estate agent will cost you lots of money. While there are fees associated with hiring a real estate agent, that doesn’t mean it’s a bad financial move. It usually ends up saving you money ultimately!
For starters, real estate agents are incredibly knowledgeable about the real estate market, and they’ll know when a home is reasonably priced, priced too high, or listed too low (which could be a sign of hidden issues with the home). If something seems off, they’ll do all the negotiating for you to get a fair price you can afford.
Real estate agents will help you every step of the way when you’re navigating home-buying processes and paperwork. You’d be shocked at how many forms and contracts you must read and sign, which is time-consuming and mentally draining. Real estate agents have gone through this a time or two (or hundreds) and will support you and get things done quickly.
Plus, real estate agents know what homes are for sale that fit your dream description. And even if you do find one on your own, you might not be able to actually view the house if you aren’t working with a reputable real estate agent. Think about it – if you were selling your home, would you let just anyone off the street come inside to look at it? Probably not.
Work With the Best: The Answer Is BlueWest
If you’re ready to make a move and purchase your first home, the BlueWest Properties team is here to help. Our knowledgeable and experienced real estate agents live, work, and play right here in West Michigan, so they know this market well, and what it takes to find a home you’ll love, at a price you’ll love!
Get in touch with BlueWest Properties today to become a happy West Michigan homeowner, and expect to enjoy the best home-buying experience!