Four First-Time Homebuyer Mistakes
Making a mistake as a first-time homebuyer? Unheard of. That wouldn’t happen, especially not if you’re reading this. We’re here to help protect you from the typical errors that can cause unnecessary headaches on your journey from renter to new homeowner. Keep reading to break free of the common misconceptions that can prevent you from leveling up when you’re ready to make that leap.
1. Don’t assume that you’d never be able to buy a house in the first place.
Admit it. You’ve thought this exact thing. We’re here to tell you that we’ve been there as well. Tackling this one soon will get you closer to homeownership nirvana. We’re not therapists, but we do know that the “I can’t afford a house payment” excuse is a common misconception. A day will come when you finally compare how much you pay in rent to what you might pay in a mortgage. Why not today? Try out this handy mortgage calculator, tinker with the numbers, and analyze how much house you can afford for the same amount as your current monthly rent.
It’s true, not everyone is cut out to be a homeowner. So, as a subset to this number, we’ve listed a few of the additional responsibilities that the homebuyer takes on:
- Paying property tax. This can change yearly and is often tacked onto your mortgage payment for you.
- Yard care. This can be a big addition to your life, unless you buy a condo or your HOA handles it (which you pay them for).
- Regular home maintenance. The water heater breaks, the furnace goes out, termites attack! These are all things that the landlord generally handles for renters. No more. They’re now in your capable, adult hands.
2. Don’t forget to get pre-approved.
Like anything in life, you have to know what questions to ask. If you’ve never heard the term “pre-approval,” how would you even know that it’s something you ought to do? Getting pre-approved for a loan means that you’ve found a lender who is willing to finance a home purchase on your behalf (like us! We do that!). They’ve looked at your income, your credit score, and several other aspects of your financial health and have verified that the information is true. Once they do this, they’ll approve an amount they’ll be willing to lend you to buy a home.
This process will make it possible for you to begin hunting for a house in your price range. It’s a bit of a safety net, so that as you search for a home, you know that once you find a house and want to put an offer in through your agent, you’re not wasting your time or the time of the seller. Likewise, your dream home won’t slip away like a mirage as you wait to find out if you can even afford the one you want.
There are a lot of steps to pre-approval. The main idea here is that pre-approval is different from being pre-qualified (which is a quicker process, but doesn’t require income verification).
3. Don’t assume you need a big down payment.
This one can scare even the most careful life-planner away. A 20% down payment looks like Mount Everest next to an anthill—who has that kind of money just laying around? Take heart! The average down payment for first-time homebuyers in 2016 was just 6%. Not only that, Fannie Mae and Freddie Mac offer mortgage products for eligible candidates for as little as 3% down. Check out this infographic for a closer look at the misconceptions regarding down payments.
Other options for gathering the funds to cover your down payment include assistance programs like these, which make it possible for the first-time homebuyer to come to the negotiation table with less anxiety-inducing numbers.
And don’t be afraid to get creative when it comes to putting together the funds on your own. Consider these other sources: borrowing against a 401(k), stocks, bonds, the cash value of your life insurance policy, cash savings at home, gifts, grants, or down payment assistance.
When you choose a lender to service your loan, make sure they offer the types of programs that can help you. From FHA loans to VA loans, there are many sources of aid designed specifically to help out first-timers like yourself.
4. Don’t make a big purchase right before you decide to buy a house.
Are you thinking about buying a house soon? But you also have your eye on a new car, because it’s finally within your reach? You’ve landed a sweet new job and all those three-minute ramen dinners are about to pay off, because now you can finally afford a car that truly suits a real, live adult?
Hold off! Save it for after you sign all the paperwork and get into the new place. Big purchases right before you buy a house can negatively impact how the lender looks at you as someone they can trust with large sums of money on loan. After the papers have been signed and you’ve settled into handling a new house payment, then you can reconsider that vehicle purchase. This also applies to any big debt you may put on credit.
There you go. No list is really exhaustive when it comes to being prepared to buy a house, because to be honest, it’s like anything in life—things come up, plots twist, and storm clouds form on the horizon. But go in prepared for the typical scenario. Storms pass, twisted plots straighten out, and our list can save you from the typical common stressors that come up when making the decision to tackle buying a home for the first time.
I'm a first-time homebuyer.
- Buying a House: Right Size vs. Right Budget
- Four Things to Know About an HOA
- The Top Tax Benefits of Homeownership
- Purchase an Existing Home or a New Build?
- Four First-time Homebuyer Mistakes
- Five Tips for First-time Homebuyers
- Which Loan Program is Right for You?
- Comparison of Four Popular Loan Types
- Thinking Outside-the-box to Get Inside a Home (Infographic)