Here’s how to make sound decisions while avoiding common structural, and, financial mistakes made by a first-time homebuyer. The purchase of one’s first home ushers in a new era of responsibilities.
Congratulations, you’re a first-time homebuyer! For many people, buying a home is the single largest investment they will make in their lives. However, purchasing a home is not a one-time event.
Setting both short- and long-term goals for your new home, your family, and your lifestyle is essential for successful homeownership, as it allows you to enjoy your new home without financial stress—while also ensuring that your investment grows in value.
First-time Homebuyer Mistakes
Mistake #1. Failure to Create an Emergency Fund
Life throws us curveballs, and it’s impossible to predict when we’ll hit a rough patch. If a homeowner loses a job or an expensive repair becomes necessary, it can strain finances and, in the worst-case scenario, lead to foreclosure.
After closing on a house, a good rule of thumb is to put off any non-essential big-ticket items until you’ve saved enough money to cover six months of your regular payments. This emergency fund will ensure that an unanticipated emergency does not result in a financial disaster.
Mistake #2 Saving For a Down Payment Only
Down payment refers to the portion of the home’s purchase price that you pay in cash at the time of purchase. A few decades ago, it was customary practice to put down 20 % of the purchase price as a down payment, but this is no longer the case. There are several loan kinds that need as little as 3 % down payment. You’ll be responsible for any closing expenses aside from the downpayment when you buy a home. Closing costs can include these expenses:
- Loan origination fees — 1 % of the home’s purchase price
- Title insurance — varies by area
- Homeowner’s insurance — 1 year of premiums
- Private mortgage insurance — up-front fee or monthly installments
- Property tax — 6 months
- Escrow costs — 2 percent of the home’s purchasing price
To avoid making this mistake, make sure you have enough money saved up to cover not only the down payment but also the costs of moving and closing the sale.
Mistake #3 Maintenance Failure
Most sellers spruce up the house and address any repair issues before putting it on the market, so when new buyers move in, the house is usually in good condition. A house, like all man-made things, requires ongoing maintenance.
Failure to perform routine tasks, such as changing HVAC air filters every three months, clearing dry leaves from gutters, or having a technician service the furnace once a year, can result in damage and costly repairs.
Mistake #4. Buying a House You Can’t Afford
Humans are aspirational creatures, so if a lender pre-approves the amount you can spend on a home, you may be tempted to buy at the top of that range. Perhaps your real estate agent favors higher-priced properties, or you’re trying to keep up with the Joneses you don’t even live next door to!
Take a step back and accept the fact that purchasing a home at the top of that price range can be risky. This will raise your mortgage payments, reduce your monthly cash flow, and prevent you from affording other necessities such as healthcare.
Mistake #5. Early Renovations
Owning a home is an exciting experience, and it’s natural to want to make it truly your own through renovations or remodeling. Any reputable contractor, however, would advise you to wait at least a year before embarking on any major projects. You’ll become more acquainted with the house’s perks and quirks if you live in it for a while first, and after a year, the modifications you want to make may not even represent the concepts you had when you first moved in.
Mistake# 6. No Budget Plan
Buying a home is more expensive than just making the monthly mortgage payment. New owners should be aware of additional costs such as homeowner’s insurance, property taxes, utilities, and homeowners association (HOA) fees, as well as the cost of purchasing tools and equipment to care for the landscape and handle DIY repairs. Making a budget to account for all of the new items you’ll need as a homeowner will allow you to spend your money wisely.
Mistake #7. Purchasing All-New Furniture
New house, new possessions? While it may appear reasonable, buying all new furniture to create a new look in your home can be a mistake for two reasons. First and foremost, if your budget is already tight, this will make it even tighter. Second, live in the house for several months before investing in new furniture to get a better sense of what you want. A round bed, for example, may appear fabulous today, but it may appear gauche and dated a year from now. When it comes to furniture and appliances, impulse purchases can lead to buyer’s remorse.
Mistake #8. Impulsive Landscaping
It may be tempting to go out and buy some trees and shrubs to make a new yard look less bare, but these types of plantings require time and effort. It’s a better idea to start by figuring out a long-term landscape design.
Explore lawn and garden ideas online, then research different flora to see what will thrive in your area without any special care. Then, sketch out a design and tinker with it until you have the feeling that everything you add to the landscape will look cohesive rather than haphazard.
Mistake #9. Unaware of Property Line Developments
You may want to define your new property with a row of trees or a fence, but you should avoid planting or building along a property line until you know where the line is officially located. What appears to be the property line—for example, the grass line where the neighbor always mows—is frequently not.
The true property line could be a few feet in either direction, and the last thing you want is to have problems with new neighbors. Before you do anything on a property line, have a City Surveyor come out and determine the exact lines. Once you’ve decided, it’s also a good idea to discuss your plans with your neighbors; you don’t need their approval, but they might have some useful advice, and they’ll undoubtedly be supportive.
Mistake #10: First-time HomeBuyers Not Working With A Real Estate Agent
Is it possible to purchase a home without needing a realtor? Yes. Is it a good idea? It’s possible that the answer is more complicated.
The fact of the matter is that real estate agents are professionals in their field. Despite the fact that you may be able to save money by conducting the process yourself, having a real estate professional on your side can assist to lessen anxiety and make the house buying process run more smoothly in general.
Avoid These First-time Homebuyer Mistakes
Due to the large number of steps involved in buying a house, it’s easy to become lost along the road – but when you’re making one of the most significant financial investments of your life, even the smallest mistakes can soon add up.
Thankfully, by learning from the mistakes of others who have gone before you, you may break the pattern of first-time homebuyer mistakes. If you have trustworthy friends or family members who have recently gone through the process, ask them for their advice on what they’ve learned along the route – and remember, your real estate agent is always available to assist you.
So, you’ve decided to proceed with the purchase of your first home? Contact us now!