It happens every day. First-time home buyers, partly due to enthusiasm or partly due to ignorance, make costly mistakes during the home buying process. Like buying more house than you can reasonably afford, or simply buying the wrong house because they thought they were getting a deal.
To help you keep your sanity and your cash, become an educated consumer and avoid the mistakes others have made before you. Here are a few common mistakes new home buyers should avoid:
Big Mistake #1
Not planning ahead. From the moment you think about buying a home, start planning. Start by requesting a copy of your credit report. Carefully examine it for errors and be prepared to answer questions about items on your credit report. Talk to your MN based mortgage lender before you attempt to rectify errors on your report – in some cases your attempts to rectify credit report errors can cause a delay in the approval of your loan. Talking with a licensed Mortgage loan professional (not an unlicensed bank application clerk) can provide you valuable guidance when it comes to improving your credit score or correcting errors.
Are you currently renting? Check your lease for an early release clause. If you’ll be subject to penalties, try to time your closing with the expiration of the lease.
During this planning phase, consider your life over the next five to seven years. Do you plan to start a family? Will an in-law eventually move in with you? Will you be working from home? The number and layout of the rooms you require will depend on your answers. If you qualify for financing based on a dual income, will you be able to survive on one salary in order to fulfill a long-range plan, such as one parent staying home to raise a child? Once you’ve answered these questions, establish a plan. Then direct the process with reference to the plan. Don’t let the process dictate to you.
Big Mistake #2
Failing to understand the home buying process. First-time home buyers need to ask questions, lots of questions. Choose a real estate agent and licensed mortgage professional who each have experience working with new home buyers. Experienced Realtors and financing professionals should be willing to explain the entire home buying process – from viewing homes, to negotiating, to financing, to escrow and closing in detail, and explain it again until you understand it. Do NOT tolerate a Realtor or Loan Officer you are not comfortable with or someone who treats you like a number.
Big Mistake # 3
Getting in too deep. It can happen when home buyers shop outside their budgets or over-extend themselves. What can you do to avoid getting hooked? Monitor your expenses for a couple of months. Then, based on your findings, develop a budget that truly reflects your lifestyle. Talk to a real estate agent who can provide insight into new home expenses and taxes. Then revise your budget.
Don’t buy a home thinking you’re getting a deal because the previous tax value was high, and the current price is low. If it was worth the previous tax value, that is what it would be seller for!