The last thing a first-time homebuyer wants to do is mess up the entire homebuying process by doing one of these common mistakes.
Yet, they continue to make them.
Listen, buying a home is one of the biggest financial decisions a person will make, and all it takes is one bad or misinformed decision to mess up the entire process.
Movoto complied a list of 10 common mistakes first-time homebuyers make.
After perusing the list, HousingWire condensed the mistakes into 8 things that could ruin the homebuying process:
1. They don’t watch their finances before buying a home
This would include watching your credit, taking on too much debt right beforehand or making a big purchase right before closing.
Debt-to-income ratio is a huge deciding factor on credit scores and it’s one of the first things that lenders look at when putting your mortgage together. Lenders want to know how much debt borrowers have already accumulated against their income. The more debt the borrower has, the less of a loan they will be able to get.
Many people don’t realize that lenders look at all financial information again before closing occurs to make sure that nothing has changed. And that debt-to-income ratio that they used to create your mortgage in the first place is one of the first things they’re going back to check. So, hold off on any plans to buy a new car to park in that new driveway or furniture to fill the house.
2. They don’t take the time to get pre-approved before house hunting
It’s easy for homebuyers to assume what they can afford and to just start looking without taking the steps through the lender first, but it’s not the smart move. Most real estate agents won’t show potential homes without a prequalification letter to in hand. And some won’t do anything without the pre-approval. [Go to any mortgage lender and ask about pre-approval.]
3. They take on more than they can handle financially
Many first-time homebuyers make the mistake of assuming that just because they can afford the house that means that they can afford to live there. That’s not always the case. There are many extra costs associated with homeownership that often get overlooked by someone who is new to the game.
4. They get into a fixer upper they don’t have time or money to fix
Fixer uppers can often seem like a great savings. Home renovation shows can do that to anyone. The problem is, though, that most people don’t have a production company budget and a huge crew behind them working around the clock to get the jobs done. Without money and time, fixer uppers stay fixer uppers. Not only can the novelty wear off fast, but what seemed like a huge savings quickly starts to look like a giant money pit.
5. They prioritize the home over the neighborhood
When people start looking for that dream home in their dream neighborhood, many realize just how far outside their budgets dream homes can be, especially in big cities and affluent suburbs. It’s tempting to continue to look for that same dream home, just in a neighborhood that might not be as good.
6. They put all their eggs in the online basket
The Internet has become an invaluable tool for home buyers. Searching through homes, researching neighborhoods, getting your credit score, and finding out what lenders are prepared to give has never been so easy. However, it’s still not as good as getting a reputable team of professionals who can physically meet with or at least speak with you in your corner.
7. They spend all their money on the down payment
Putting down a 20% down payment on a home is often mandatory these days unless you’re interested in paying mortgage insurance. Many people save and scrape every last dollar they can get together for years in order to meet that 20 percent down payment figure and then as soon as they reach it, they go through the home buying process. Many people empty out their savings in order to meet the down payment, leaving themselves with nothing left over.
8. They skip the home inspection
Skipping the home inspection might seem like a quick and easy way to save money for some people. The novelty and excitement of a new home make some people feel like there’s nothing that would possibly change their minds about wanting to buy it. That is until you’re moved in and realize that there are major and very costly maintenance issues such as mold, termites, a leaking roof, electrical issues or foundation problems