Buying a home is an exciting milestone in life, especially when your’re doing it for the first time. The pursuit of the American dream doesn’t come without it’s share of potential missteps. First Time Home Buyer mistakes may not always cost you the opportunity of a home you can call your own, but they can be expensive. Follow these simple tips to improve your chances of a happy, more affordable home buying experience.
If you’re searching the phrase “biggest first time home buyer mistakes”, the probability of you being part of the Young Millennial generation are high. This group, born from ’90 to ’98 currently has exploding economic wealth. For the first time last year the Young Millennial’s purchased more real estate than the Silent Generation, and are 86% likely to be first time home buyers when making a purchase.
It’s so easy to buy too much house. Interest rates are at historic lows, making large mortgages seem tantalizingly affordable. When you’re finally in that sweet spot in life to buy your fist home, you’re circle of advisers may be pushing you hard to borrow as much as possible and leverage the incremental growth of property asset values.
Who doesn’t want to hear mortgage and real estate professionals tell us how much home we can afford? After all, you’ve launched a successful career, saved a significant deposit with your surplus cash flow and maybe ready to settle down and grow a family of your own.
Borrowing up to and beyond your limit is risky. Suburban paradise is lost without a solid plan B in the event of a job loss. If the economy does abruptly turn south, so will housing demand. Plus, selling shortly after a purchase may net less than you paid for your home. It takes some time recoup the transaction costs associated with real estate.
Larger homes also have larger property taxes and insurance costs. Energy costs to heat and cool larger spaces can also shock budget-wary home buyers.
A less stressful option is to buy only what you need for the family you have. You can always up-size your residence as your budget and financial strength expand,
Don’t make the mistake of applying for only one mortgage quote. A mortgage is potentially the most expensive service we will purchase, so it makes sense to shop around and seek the very best terms.
There’s a misconception among home buyers that shopping your credit between multiple lenders will damage and reduce your credit score. A mortgage is considered to be a hard credit inquiry, and will slightly reduce your credit score. However, the Consumer Financial Protection Bureau explains that multiple hard mortgage inquiries withing a 45 day window will only count as a single inquiry so the negative impact will be minimal.
The credit monitoring institutions’ realistically acknowledge that consumers should not be penalized for seeking the best mortgage product. Just because you have two, three, four, or more mortgage inquiries does not mean you are seeking that many different home loans
Shop around, and see what the competitive banking sector is willing to offer. It will save you money.
First time home buyer programs offered by both lenders and regulators of all size, offer enormous benefit to the community and improve the preparedness and chances of success for borrowers.
Fairfax County Home Ownership division offers a host of resources dedicated towards promoting home ownership, especially for first time buyers. They provide resources that not only increase the affordability of home ownership but also promote education and awareness among the county towards sustainable and successful purchasing.
Private lenders offer a myriad of first time home buyer resources to attract the burgeoning young consumer target audience. For example, lenders offer low to no down payment options, preferential interest rates, and even contributions towards closing costs. Shop around for the best terms and benefits that meet your needs.
Stop shopping for consumer debt. After you have applied for your mortgage and before closing, your mortgage lender will continue to monitor your credit. Any conspicuous changes such as purchasing a car, appliances, or furniture with borrowed money will alter the credit analysis equation and may cost you a higher interest rate or lose the loan for you altogether.
Wait until after closing before taking on additional debt. You may want to wait a few months into the new loan to ensure that your budget can afford an increase in repayments after adjusting to the new mortgage.
Things in houses break, big and small, all the time. There’s often at least one utility bill per cycle that’s too high, and most home owners are always running to the hardware store to take on a home improvement project of some magnitude.
Homes cost a lot of money. One widely acknowledged rule of thumb for budgeting for home repairs is the 1% rule. On the average home in Fairfax Virginia, that roughly equates to $450 per month. While you may not spend that much each month, you will spend a lot more than this for larger projects like roof replacement.
Setting aside a savings account specifically for home contingencies is smart financial planning. Paying for home repairs with cash reserves puts far less strain on household finances compared to being forced to borrow that money on a home equity line of credit or credit card.
It’s very easy to let this discipline slip. However, planning to maintain and improve your home really pays dividends when it comes time to sell. Homeowners are often disappointed with their home valuation when they try and sell, mostly because the home is not updated with contemporary finishes that home buyers are looking for. If renovated kitchens with stone counter tops, hardwood floors, stainless steel appliances, pendant lighting, and under cabinet LED’s are what buyers are looking for — you will only get top dollar and multiple offers if that’s what you are offering.
First time home buyers don’t have to make the easy mistakes of failing to shop, taking on too much debt, buying too much, failing to keep reserves, and not seeking every benefit available. It’s a great time to purchase a home – especially a first home, and it’s more profitable and fun if you minimize your mistakes.