10 Rookie Homebuyer Mistakes to Avoid
1. Not checking your credit report and score
You've clicked through hundreds of online listings, compared floor plans and square footage and are eager to jump-start your search. But before you even think of setting foot in an open house, make sure you get a copy of your credit report. The cleaner your credit report and the higher your credit score, the more likely you are to be pre-approved for a mortgage at a low interest rate.
Review your credit report a few months before you begin looking for houses. This will allow you ample time to ensure the facts are correct, and dispute mistakes before a mortgage lender checks your credit. You can access a free copy of your credit report at annualcreditreport.com once every 12 months.
2. Not getting pre-approved
After you've assessed your credit report, it's time to establish -- with a qualified lender -- how much you can spend on a house. This includes getting a credit check, giving your lender a copy of W-2s, pay stubs and bank statements. Getting pre-approved can help you save time by looking for homes for which you can qualify instead of dreaming about something out of your price range. And it will put you in a better position over another bidder with no pre-approval.
3. Not creating a long-term budget
If the housing crisis proved anything, it's that mortgages were given to people who clearly did not have the means to pay them back. To avoid making this mistake, you should create a budget before even beginning to search for homes to determine just how much you feel comfortable paying for a mortgage. A good rule of thumb is to devote no more than one-third of your monthly household income to housing costs, which includes mortgage principal, interest, taxes and insurance. There are several worksheets available online to help you figure out how your income, debts and expenses affect what you can afford each month for the next 15 or 30 years.
4. Forgetting about the hidden costs
There are several hidden costs for which first-time home buyers neglect to prepare. They can be anything from the closing costs to appraisal fees, escrow fees, homeowner's insurance fees, property taxes and even moving costs. Another factor is the cost of repairs and maintenance once in their new home. When renting, many issues with be fixed by, or at least paid for by, the Landlord. When purchasing a house, you will be responsible for maintaining the property.
5. Not using professional help
Sure, it's possible to go out and buy a home without the aid of a professional real estate agent. But think about how much time and stress a good agent can save you. For starters, Realtors have access to all the homes on the market through the multiple listing service, or MLS. They are also aware of homes that are under contract or have been sold. Many websites such as Zillow, provide confusing information and many times the information provided is incorrect and misleading. A Realtor has time to investigate the properties and will make appointments to show you the houses in which you are interested. If the home is the one for you, they can provide a comparative market analysis to determine proper offer pricing and negotiate the deal that gets you the house at the lowest price possible. After you have the house under contract, their assistance is invaluable. From inspections to negotiating repairs to getting to Settlement, their knowledge of the process and the market is invaluable.
6. Picking your real estate agent blindly
One mistake many people make is finding an agent with whom they aren't comfortable. The best way to find an agent is by asking friends, relatives, friends, neighbors or co-workers. If you can't get a referral from them, you can also search at the National Association of Exclusive Buyer Agents, a nonprofit that represents buyers. A good real estate agent will be friendly and accommodating, show only homes that fit your parameters, and help you with strategies during the bidding process—but never pressure you into something with which you're not comfortable. It's important that the Realtor be experienced with first-time buyers, understand their wants and needs, and be able to connect with them well.
7. Thinking you'll get everything on your "wish list"
Another mistake people make is being too close-minded while searching for their home. It is important to sit down with your Realtor before searching for a home and creating a need/want list. Some of the items you might want to include as "must haves" or deal breakers are the towns you'd want to live in, square footage or accessibility to transportation. The second part of the list would be things you don't necessarily need but wish to have, such as a garage, new kitchen appliance, or an extra room for an office. As you search for your home, you may realize there are certain parameters you really want or don't want so it's important to have open communication with your Realtor after seeing each home. Your aim is to be able to afford everything you need—as well as some items you want—all while staying within a long-term budget.
8. Not keeping your feelings in check before hiring a home inspector
You've already chosen the perfect paint color to match your living room set. But hold on: Before you start picking out accent pillows for your sofa, you need to bring in a home inspector to check the safety of your potential new home. Inspectors will evaluate the structure, construction and mechanical systems of the home and will give you the approximate price of repairs that may be needed. They will examine everything from the electrical system, water heater, and HVAC system to the foundation and floors.
9. Not researching your neighborhood
You may be living in your dream home, but your neighborhood's a nightmare. Or you may have children or are planning to have children in the near future, but you didn't consider the quality of the school districts or parks in the vicinity. You should ask yourself a number of questions during your home search, such as "Are there good schools nearby?" and "Do I feel safe coming home at night?"
If schools are an important factor, you should go check them out personally. Speak with the principals or the parents waiting on the steps outside to pick up their kids. To view crime in a neighborhood, please visit spotcrime.info/. To investigate schools, please visit greatschools.org. Remember, you can change your house, but you can't change the neighborhood.
10. Not considering the resale value of your home
You've just started the home-buying process. The prospect of selling a home hasn't even crossed your mind. Besides, you're thinking you might live in whatever home you buy forever. Yet life is full of surprises, whether it is a job transfer or having another child or taking care of an incapacitated relative.
When the time comes to put your house on the market, will your home be easy or difficult to sell? While you're on the hunt, it's a good idea to account for preferences of the typical home buyer. Just because you love to landscape or enjoy a bright-pink backsplash doesn't mean a prospective buyer will.
*information gathered from US News article