Buying a home for the first time can be an invigorating and scary experience. You may find the whole ordeal to be a bit overwhelming. Here are some pitfalls to avoid when you’re buying your first home:
1. Buying Before You’re Ready
Although you may hear people say you’re “throwing your money away on rent,” it isn’t always wise to buy a home. If you make a good salary and have an expanding family, the desire to own a home is natural, but you have to make sure that buying makes good financial sense. Start by evaluating your debt and income. You should cap your spending on a home at no more than three times your household adjusted gross income. Also, you should reduce your income by your debt. This is how much house you can truly afford. Most financial experts also recommend that you have eight to 12 months in liquid assets in order to be totally prepared for homeownership.
2. Not Asking Questions
For first-timers, being afraid to come off as too eager or annoying with questions can force you to miss important information. After all, smart people ask questions! Don’t be afraid to ask for definitions or explanations of everything, even if you think it should be something you know. You never know how much trouble you can get into by not understanding basic home buying terminology.
3. Underestimating Additional Costs
Just because you can afford your mortgage payment each month doesn’t mean that you can afford a home. You must also take into consideration closing costs, property taxes, home repairs and unexpected emergencies. In addition to these expenses, you should consider the costs of upkeep, including utilities, lawn care, security systems, pest control and annual maintenance.
4. Overestimating How Much You Can Afford
This goes back to being realistic about your income. Just because you’ve been approved for a loan amount doesn’t mean you can afford it.
5. Forgetting About Resale
This is a dangerous pitfall many people are contending with now that the market bubble has burst. They purchased homes that were “unique” or “needed work” but never got around to doing it. Now, they’re stuck with homes that are worth even less than they paid for them and still are in need of repairs. Which brings us to the next pitfall…
6. Thinking Home Repair Is Simple
This is a major no-no. Never assume a repair on a “fixer-upper” will be simple or cheap. Even if you are doing the labor yourself, the cost of permits and materials alone can set you back an enormous amount of time and money, so be prepared for this.
7. Forget About the Neighborhood
Be sure to visit any potential home at night as well as during the day. Remember, if you buy a home, you are buying the neighborhood also. Keep an eye out for the area’s progress. Is it on the upswing or in the middle of a downturn?
In Favor of Home Ownership: 5 Reasons to Buy
Still Renting, Even Amid Low Home Prices
Are Housing Prices Still Too High?
—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.