One of the most important milestones in life is buying your first home. It’s a time that everyone has dreamed about, imagining the size of the yard and the color of the front door. What most people don’t think about is how to strategically find, purchase, and care for the home.
Learn from these common mistakes made by first-time home buyers and set out to buy your first home the right way.
1. Their mentality and lifestyles haven’t settled down enough.
Many first-time home buyers are young and don’t consider the long-term commitment of settling down into a neighborhood. There are emotional and financial decisions that must be made, and some aspects of their lives might not be able to support this life-altering choice.
Whether it means moving away from friends and family, or getting a new job to support finances, a lot of unexpected changes will come up and calls for the right mentality to make it work.
2. They don’t start by getting approved for a mortgage.
The very first step is to meet with mortgage brokers and find the price range you qualify for. Research this process carefully and take plenty of time to calculate your financial arrangement for years in advance.
To get an idea of how much your mortgage will cost monthly, use the PMT function of a spreadsheet program and don’t overlook the details.
3. They don’t consider hidden costs.
Buying a home comes with a down payment, commission fees, closing costs, and property taxes. Maintenance fees will rapidly add up as well.
You may purchase the home with a working hot water heater in the summer time, but come winter, what if it needs repair or replacement? Luckily, the best protection is to purchase home warranty coverage with your new home, so that you can budget monthly payments along with your mortgage instead of emptying your savings account when a problem arises.
4. They buy into neighborhoods they aren’t familiar with.
A rookie mistake for buying property is overlooking the new neighbors and not taking the community seriously, such as in a Home Owners Association. Many rules and contracts come with buying homes in certain areas. You may not be able to paint your house a certain color, or have friends park their cars on the street. Even though you’re not renting, HOA’s have control over a surprisingly large portion of your life, and even come with extra dues.
Other expenses may easily come up, such as if your property line is contested or if children wander onto your property and get hurt. Get to know the people you’ll see every day before committing to living next door to them.
5. They think they can buy a house for cheap to flip it without understanding the risk.
One way to go about buying a first home is to purchase it as a “fixer-upper” and increase the property’s value while living in it. This is a business strategy that requires the home to fit the right criteria to be worth the investment.
In this case, the house should always be considered a temporary living arrangement, because the idea is to make as few mortgage payments as possible while investing just the right amount of money into improvements that will boost the property value above your purchase value. In other words, flipping houses is for experienced real estate experts and not first-time home buyers.