First-Time Homebuyer Mistakes You Don't Want to Make
You really, really don't want to make mistakes when you buy your first house. It could be a costly error -- even more costly than the time you dropped $10,000 on rare Beanie Babies in the ‘90s. Unfortunately, mistakes seem to be part of the home-buying process. To find out some of the more common screw-ups first-time homebuyers make, we spoke to Sandra O’Connor, a Realtor for 29 years and the regional VP of the National Association of Realtors. Turns out, most of them are avoidable if you know what you're doing.
Making huge purchases right before you close on the homeBefore you go buy that new electric BMW just because Katie Couric and Bryant Gumbel told you to in a commercial, you might want to hold off until you close on your new house. O’Connor says lenders will re-check your debt load right before closing, and if you have a big ol' car payment on the books, they might rethink your ability to pay off the home loan. She’s seen lenders back out at the last second. This also goes for big furniture or appliance purchases, too. Might wanna keep that Sears card in your wallet until you move in.
Not getting your finances in shapeIf you assume you’ll have enough money to buy a home because you have the down payment in hand, guess again. First of all, checking your credit score is key -- it can determine the interest rate and insurance costs related to your new home. And there are plenty of pre-buying expenses you might not realize you need to pay for as well. “The more you can invest up front, the easier the loan process will be,” O’Connor says. “But throughout that process, in addition to applying for the loan, you also have to do things like get insurance for your homeowners policy in place. You need to have inspections. The lending institution will probably charge them a fee to have an appraisal, as well.”
Underestimating the ease of home improvementsIf you buy a fixer-upper, there are going to be myriad costs and time spent on getting the place in shape. But even if you buy a home that needs a few updates -- refinishing hardwood floors or remodeling a bathroom -- O’Connor cautions that “the projects will always take longer and cost more than you think.” Unless you buy a house that’s on an episode of Property Brothers, and then the whole job will only take about 45 minutes.
Not working with a trusted adviserIt might seem a little conflict-of-interest-y that a real-estate agent would recommend you work with a realtor when buying your first house instead of going it alone... but that advice also has the benefit of being a good idea. “If you have a professional helping coordinate everything, then the [home-buying] process will be smoother,” O’Connor says. “And they'll also be alert to what might be coming up along the way. There are ways, if you have an agent representing you, that they can negotiate with the seller to pay your closing costs.” And it’s not just your agent that can help -- if they work from an office, “they bring to the deal a whole team to support the process and guide you right.” Just because you read one news article on Trulia about how to buy a house, that doesn’t make you equal to an agent’s years of experience in buying and selling real estate.
Not taking a long-term outlook on your purchaseIf you’re buying a house in a town with bad schools (aka any school Michelle Pfeiffer might teach in), but think it doesn’t matter because you don’t have kids, think again. “You might say, ‘Well, I don’t have kids, so schools don’t matter.’ To the next buyer, those schools might be very important,” O’Connor says. Also, will this home have room for you and someone else if you get married? Will you be able to sell the house if you have to move? Before you drop any money on a home, those are questions worth thinking about.
Making an emotional purchaseYes, that dog is a good boy. He is a very good boy and you love him very much. No, he doesn't know how he got so cute. You should ask him again. But if you’re buying a house just because it has a fenced-in yard for him to run around, that might be an emotional reason to buy a house, not a smart financial decision. Perhaps the good doggie could do with a smaller yard, and you could not spend so much on a house.
Emotions are often part of the house-hunting process because looking for a house is a serious time investment, and frustration is inevitable. And if you’re house hunting with someone else, you’ll likely have to compromise on the type of house you settle on. Feelings may get hurt. Regardless of the situation, be it doggy- or human-related, if you let your emotions get the best of you, the end result might be a poor financial decision.
Choosing the wrong lenderThere are plenty of lenders out there, eager to give you a loan worth hundreds of thousands of dollars. But is the lender reputable? O’Connor recommends asking around to find out if the lender delivers on promises, whether they be the rate or the timeliness of the loan. She cautions that lenders call the shots for a simple reason: “Those who have the gold make the rules.”
Working with the wrong real-estate agentSelecting your agent by whoever comes up first on your Google search of “good local real-estate agents who get turnt on the weekend” isn’t the most sound strategy, despite it giving you someone else to hit the bars with. However, you do want to find someone with whom you connect with, O’Connor says. Do you get along personality-wise? Does their schedule mesh with yours? Interview a few! Get recommendations. Finding the right person is a huge deal. Finding the wrong one can be hugely detrimental.
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