First-time home buyers have a hard time figuring out how much to spend on their new home. They might look at a $250,000 home, wonder if they can afford a $300,000 home, and so on. With the basics, it’s easy to decide how much you can afford, but there’s more to buying a home than that. And like buying anything, there’s an argument for going over budget, if you get a good deal, for a good reason.
Real-estate experts recommend figuring out what your monthly expenses will be — taxes, insurance, mortgage payments, etc. If you can afford a house for $250,000, that means you’ll need to spend a maximum of $200,000. First-time home buyers often panic and spend money they don’t have to make a purchase they want and don’t have the money saved to pay for it later. If you have no cushion or a lower income, there’s a higher risk of damaging your credit score.
First-Time Purchasers Make the Same Mistakes
First-time home buyers, especially those making their first purchase, may have grown up in a family with a financial adviser who would like them to buy a home sooner rather than later. Not everybody can afford a five-figure down payment. They don’t realize how much longer it can take to pay off a mortgage than a college education. There are several reasons a home can be delayed for a long time, but most of it depends on the economy. Buying a home is a capital-intensive process. Here are the seven top mistakes first-time homebuyers make.
Buying the wrong home
It’s not uncommon for first-time buyers to buy the wrong home, either because they bought the wrong neighborhood or bought a home that doesn’t suit their needs. First-time buyers are only well-informed when it comes to the home they’re going to buy. Instead, they should ask many questions before they decide to buy. And they should take advice from a real estate agent and their parents, rather than just relying on the internet. First-time buyers might consider working with a good real estate agent after doing enough research.
Not enough savings
When you’re just starting, it can be tempting to spend every last penny of your retirement savings. But that’s not the smartest choice for first-time buyers. That could mean you’re saving hundreds or even thousands of dollars a month. Is it a long-term solution? Buy a home you can afford, rather than one that you think you can. But make sure you are taking the right financial steps before you take the plunge.
Not enough home-buying experience
Many first-time home buyers enter the market after years of renting and move in without doing the necessary due diligence. They don’t check out the neighborhood, home size or upkeep, and miss a lot of what makes a great home. They also may be focused on lifestyle upgrades they want to make after moving in, which can be costly in the long run. Some millennials have never had to contribute to a down payment or mortgage payment, but you may want to start working on saving if your income is low. A good place to start is calculating how much you will need each month for the loan and how much money you’ll need in your bank account each month to make the monthly payments.
Moving too fast
First-time buyers want to dive right in and make quick purchases. Before the acquisition, take a step back and evaluate your options. Sometimes, you might want to move in together before buying a home, or you might not be in a good position financially to buy a home at all. Thinking you have to buy a house you can afford right away.
Buying a home outside of your budget
When it comes to houses, the sky’s the limit. But what you’re looking for is a home you can afford or one that you can remodel later. Make sure you don’t buy something outside your means or without a plan for the property.
Before you go shopping for a home, check around at a few of the real estate websites you trust. You want to know that the house you’re considering is a good deal without being steered toward an overpriced deal. But if you wait until you have enough money in the bank to make the purchase, you’re giving yourself plenty of time to rack up debt that will require you to pay it off later. Avoid cheaper houses but require you to trade a lot of money upfront to get into the home. In today’s hot housing market, you can find good value in your price range, but you need to know what you’re doing and what makes sense to you.
Buying a home too quickly
First-time home buyers make one mistake in particular when they buy a home for the first time: buying a house too quickly. When you search for the home of your dreams, jumping straight to a property that’s listed for sale can be a big mistake. You don’t want any errors at the peak of a price cycle. You’ll end up upside down in your mortgage and probably end up losing money on your home. If you want a home in the $300,000s and get priced out of that range, stick with it. Before you make an offer, you have to decide if you’re comfortable living in that house and its cost to live there. You’ll need to weigh how much the market values the home. Don’t dive headfirst into looking at houses without doing some basic research.
Also, try to buy somewhere else if you find out later that the house is a bad fit. Buying a house that’s larger than you can afford will only make you feel like you have to compromise and make big-ticket purchases.
Don’t get help from the right people
First-time home buyers face major hurdles, which is why it’s crucial to have an honest discussion about them and identify an honest broker. A wise broker can get the homebuyer through this difficult process. To avoid becoming a victim, be precise about your terms and agreements. Your first home is not like your last. If you fix these mistakes, you’ll be a great asset to your community and all the homeowners who’ll be watching you.
But making a move from your childhood home is all about changing your mindset. You’ll never move into your new home to live in your old house. You’ll be a homeowner, no matter where you’re living. You have to think of your new home as a separate entity. If you’re dwelling in the same locality you spent your childhood, your new home might feel like home, but it won’t feel like your last home. For professional help, reach out to Morgan law group estate planning attorneys.