Buying your first house! Must be pretty exciting! Have you thought about every little detail though? Because it’s easy to overlook certain mistakes you should avoid when buying your first home. Unfortunately, all that elation and daydreaming about how great it is to finally become a home owner, could backfire.
Mortgages are huge financial responsibilities that typically range from 15 to 30 years. Making financial mistakes when committing to long term mortgage debt is never OK. Although many argue investing in real estate is always a good idea, it’s best to avoid potential financial problems that could affect you long term.
Here are 5 of the most thoughtless mistakes to avoid when buying your first home.
1. Saving too little for a down payment
Houses are never cheap. Even buying a run down home comes with expenses afterwards. Ideally, you should have enough in savings to afford a substantial down payment.
A good rule of thumb is having at least 20% of the home’s price available to pay upfront. Mortgages insured by the FHA (Federal Housing Administration) require a 3.5% down payment. That doesn’t sound too bad, does it? However, not having at least 20% available to put down on the house requires you to buy additional mortgage insurance.
In conclusion, making the effort to save money for a down payment is worth it. The bigger your down payment, the smaller your mortgage debt will be.
2. Underestimating an affordable price range
Often times, home-owners-to-be forget about the real cost of a mortgage. Aside from paying the monthly installment, mortgage payments also include interest, taxes and insurance. Then there are utilities, homeowner’s association fees and maintenance. Failing to take these (and many other) additional expenses into consideration can lead to being overwhelmed by the total cost of the mortgage.
Unfortunately, this is a very common mistake among many new homeowners. Not being able to afford your mortgage loan often leads to having to sell your new house. Ideally, before buying the house of your dreams, you should take the time and create an estimated budget to figure out if you can afford the loan.
3. Looking at too few or too many houses
Another common mistake to avoid when buying your first home is looking at too many or too few houses for sale. Of course you should shop around and look for a home that best fits your needs! However, finding a house that’s perfectly perfect sounds like fiction. By knowing more or less what you’re looking for and how much house you can afford, you should be able to narrow down your choices.
On a different note, try not to make such big decisions in a hurry. It’s not unheard of to look at few houses and after careful consideration, realize the first one you saw would perfectly fit your needs.
Unfortunately, buying the very first property you see might not be such a good idea. What if there’s another home for sale in a better neighborhood? What if a better deal awaits just around the corner? Mortgage are among the biggest financial commitments out there, so make sure you make an informed decision before buying real estate.
4. Failing to see a home’s potential
People trying to sell their home might have a different view when staging their house to show it off to buyers. Try not to let that stand in the way of seeing a home’s true potential. Or lack of it! Imagine you’re checking out a property where you feel right at home. Everything’s so clean. The house smells nice. The furniture is so modern, just how you like it. But did you see there’s some mold behind the closets? Or have you heard the noisy neighbors right next door? Try to look at each house objectively. Don’t let emotions get in your way and make a rash decision you might regret later on.
5. Avoiding a home inspection
Although a thorough home inspection does come with certain costs, skipping it isn’t a good idea. The house you’re about to buy might look good to the naked eye, but how do you know the plumbing is in perfect condition? Or the electrical wiring. Many skip this step to save money, but hiring a home inspector could potentially save you hundreds or even more in the long run!
Avoiding common mistakes when buying your first home can seem stressful, but the truth is becoming a home owner is a wonderful thing. If you can save enough for a down payment, acknowledge a realistic price range you can afford and make informed, rational decisions, you should be able to invest in your first real estate property without too much hassle and stress.