I don’t need to tell you this: buying a home is a major financial decision. Here are some of the biggest pitfalls you need to avoid before purchasing your first home sweet home.
1. Not preparing in advance
Many experts suggest prepping a year in advance before buying a home for the first time. Taking this time to save up for a down payment, repair credit issues, and pay down debts will put you in a much stronger position once it’s time to apply for mortgage loans and make offers. You also want to aim to have 3–6 months of emergency funds set aside after you close. It’s never a good idea to sink all of your savings into buying a home!
2. Shopping for homes without a mortgage pre-approval
I cannot stress just how important it is to get a fully underwritten pre-approval before you begin the process of viewing homes and making offers. Sellers want to see that your credit and finances meet the necessary requirements in order for the loan to go through—otherwise, the deal falls apart! Do yourself and everyone else involved a favor by speaking with a trusted lender first to ensure you can get a loan and know exactly what you’ll be able to afford.
3. Meeting with one lender only
This could be a very costly mistake—don’t just go with the first lender you speak with! Meet with at least 3 different lenders so that you can compare rates, lender fees and loan terms. Making these conscientious comparisons will help you to confidently select a loan officer and potentially save you thousands of dollars.
4. Overextending your budget
This might be one of the biggest first-time buyer mistakes of all time. It’s called “buying more house than you can afford.” How it starts: a couple views a series of gorgeous homes and before you know it they’re stretching themselves a 100K over their initial budget. Being unrealistic about what you can afford can lead to a financial jam down the line. Statistically speaking, buying a home that’s above your means puts you at a higher risk for foreclosure should you ever find yourself in a financial pinch. We definitely want to avoid this!
Word of wisdom: determine what would be a realistic monthly mortgage based on your current income and financial obligations THEN choose a home that will help you stay within this budget! Qualifying for the maximum loan amount doesn’t mean you have to borrow (and then struggle to repay) that amount later!
5. Not taking into account hidden expenses
Buying a home will require more than just a down payment and closing costs. There are a range of costs associated with purchasing a home: property taxes, maintenance, HOA dues, repairs, homeowners insurance, mortgage insurance and more. Giving yourself enough time to prepare, save and budget for all of these expenses is critical to avoid being in financial quicksand after you’ve bought your home. Be sure to consult with your financial advisor and buyer’s agent to do the math before you pull the trigger on a home.
6. Leaving money on the table
In the state of Texas alone, there are so many assistance programs and grants (aka “free money”!) for first-time homebuyers. Take advantage of these programs! The reality is that most people—especially first-time homebuyers—aren’t putting down 20% on a home. This is where educating yourself on different types of mortgage loans can be a real game-changer in helping you to purchase your first home.
Hoping to buy a home in The Woodlands or Houston, TX? Give us a call at (936) 238-7122 so we can help you start the journey!