Eight mistakes to avoid when buying your first home
Buying a home is overwhelming for most first-time buyers. It’s the biggest purchase most people will make in their lives, and the process is like no other financial transaction.
Because of their unfamiliarity, first-time buyers often sabotage their home searches by making easily avoidable mistakes along the way. With the help of real estate agents, lenders and title insurers who have worked extensively with first-time buyers, we have collected a list of typical blunders. Avoid them and you will be well on your way to a smooth home-buying experience.
Mandy Mills, a real estate agent with Compass, passed along some general advice, as well.
“Find an agent who will educate you on the process before you get in the car, so that you understand the steps of the process,” she said. “A lot of people will put you in the car and start showing you things. But if you don’t know what you’re doing, that can make an overwhelming situation even more overwhelming.”
Waiving the inspection
“We never would recommend buying a house without doing a home inspection,” said Derrick Swaak, managing broker for the McLean office of TTR Sotheby’s International Realty. “But what we do see . . . is doing a pre-home inspection. With the seller’s [approval], going in and inspecting the house, making sure there’s nothing alarming. So you’ve done the home inspection, then you make the offer and you can exclude the home inspection contingency because you’ve already had a professional go through the property. That is done all the time, particularly in a really hot market.”
Failing to get preapproved for a mortgage
“Going through a preapproval process with a reputable lender should be done very early in the process,” said Steve Wydler of Wydler Brothers Real Estate. “It can be a huge waste of your time looking at homes that you can’t afford. It’s also difficult emotionally to ‘dial down’ on price.”
Know the difference between prequalified and preapproved. Prequalified is an informal conversation with a lender. Preapproved is a formal process that involves an application, lots of documentation and an extensive check of your financial background and credit.
“Get preapproved the moment you start thinking about buying a home,” said Craig Strent, chief executive of Apex Home Loans. “It’s free and can easily be renewed.”
“Another big mistake [is] not allowing a lender to check your credit ahead of time for fear that the inquiry will drag your score down,” he said. “Better to find out upfront if there are any issues so you have ample time to deal with them.”
Spending more on a house than you can afford
“Just because one can borrow up to a certain amount doesn’t mean one should,” said David Howell, executive vice president of McEnearney Associates. “There are often expenses associated with owning a home — small home improvement projects, purchase of furniture, etc. — that can be easy to overlook when securing a mortgage.”
Neglecting to consider additional expenses
“Consider potential monthly association dues if you are focused on condos or co-ops,” said Marc Ross of Compass. “These fees historically increase 1 to 5 percent a year. Also, if your search is for a detached, single-family house, are you budgeting for potential repairs down the road? Set aside a monthly amount similar to a condo [fee] for these potential expenses.”
Besides your monthly mortgage payment, you’ll need to budget for property taxes, insurance, maintenance and utility bills.
Using the seller’s agent
“Agency matters. The listing agent’s job is to negotiate the best possible price/terms for the seller,” said Hans Wydler of Wydler Brothers Real Estate. “Letting the listing agent ‘help’ you with your offer is like letting your ex-spouse’s attorney dictate your divorce settlement.”
Or thinking you don’t need an agent.
“Sometimes buyers will say, ‘I am a lawyer and I negotiate million dollar deals every day. I don’t need help from a real estate agent,’” said Donna Evers of Long & Foster. “Heed the old saying, ‘A lawyer who represents himself has a fool for a client.’ All buyers should realize they can get emotional when they are trying to negotiate their own purchase. Home-buying is a very specific transaction that is not like other sales and purchases.”
Letting emotions influence your decisions
Feelings about a home can blind buyers, causing them to overpay. Perhaps they fell in love with a house that is out of their budget or they got caught up in the heat of a bidding war. Or conversely, they are so exhausted and discouraged by the process they settle for something that isn’t right for them.
“A good agent can help you navigate the emotional roller coaster of buying a home and make informed, reasoned decisions,” Steve Wydler said.
Avoid trying to find the perfect house or the better deal.
“We liken buying real estate a lot to dating,” Mills said. “You know when you find that right person. You don’t keep looking for other people. Being able to act on a gut feeling even if you’ve only seen three or four houses, knowing this is the one. It’s often the one that gets away.”
Going with the first lender, settlement agent or real estate agent you find
“It is always a good idea to shop for services,” said Joe Gentile, president of Federal Title. “Often buyers don’t realize that there can be significant differences in costs as well as service. They should check online reviews and obtain written quotes to compare.”
“A subpar lender, agent or title company can cause major problems and stress, and in some cases, actually scuttle the purchase,” Hans Wydler said.
Making a big purchase or switching jobs before loan closes
Lenders pull credit reports just before settlement to make sure a borrower’s financial situation hasn’t changed. A big purchase can jeopardize your closing.
“This is a financing red flag,” Ross said.