You’ve finally made the decision to purchase a home instead of renting. Don’t get too excited just yet. Buying a home is a huge financial commitment. Before heading out to find your dream house, prepare yourself by researching how the process works so you can avoid these five costly mistakes first time home buyers tend to make.
1. Looking at homes out of your price range. The monthly mortgage isn’t the only expense that you need to be concerned with when buying a home. You’ll also need to take into account the interest rate, yearly taxes and fees and costs of home insurance. Know that just because the bank pre-approved you for an amount, that doesn’t necessarily guarantee you’ll be able to afford it after all costs are combined. CNBC advises that all monthly costs combined should not exceed 28% of your monthly gross income.
2. Forgetting about “Hidden” Costs. The down payment on your home isn’t all you need to come up with to buy your home. You need to factor in closing costs, fees for the appraisal, escrow, inspection and the initial moving costs to get into your home. These typically add thousands of dollars to the overall cost.
3. Don’t get attached. Don’t allow yourself to fall in love with a home that isn’t a realistic option for you. It is difficult to find the perfect home and once you do you might be committed to buying it, but don’t put blinders on. If you know that you can’t feasibly afford it because it’s out of your budget or if the necessary repairs are going to cost you money that you don’t have, and then you might want to re-evaluate your decision and keep looking.
4. Skipping the Inspection. Forbes recommends that you should never buy a home without having a qualified home inspector examine everything from the structure to the electrical and plumbing system. If there are problems, you might be able to negotiate with the seller for a lower price or require that the concerns are addressed before closing. If you don’t get an inspection, you might end up paying for major repairs like a new roof or pipes for your plumbing shortly after you move in. Once that paperwork is signed you are responsible for repairs.
5. Limiting your Search. Don’t be afraid to expand your home search to areas you hadn’t previously considered. Take into account the neighborhood, crime, neighbors, surroundings, school district and distance from work. It doesn’t hurt to look at all your options.
Being a first time home buyer isn’t exactly easy, but it doesn’t have to be stressful either. Take your time to do your research and before you know it you’ll be signing your closing papers.