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Buying a home for the first time is a huge ordeal. For most, it is more financial planning than they have done in a lifetime. Preparing your down payment, considering how much house you can realistically afford, judging the market, and then finding a great house where you'll love to live is quite the project. It's no surprise that there are a few rookie mistakes that are repeated often by first-timers, even with a good real estate agent by your side.
We're here to help, so First Savings Mortgage has collected the five most common (and biggest) mistakes that first-time home buyers often make along with helpful tips on how to navigate these decisions like a pro.
1. No Home is an Island: Don't Forget the Neighborhood
House-hunting has become singularly about the house. Photographs, virtual tours, and even home descriptions focus entirely on the structure and comfort of the property. But what about the neighborhood? No home is an island, and your lifestyle after purchasing will be shaped equally by the climate, the design of your street or building, your neighbors, and the landscape of businesses around you.
Be sure to include shopping for the right neighborhood in your house-hunting plans. Choose a home in a city you love and a neighborhood you can enjoy. And if you buy in an HOA, dive deep into amenities, costs, operations, and neighbor satisfaction before committing to buy.
2. Down Payment Isn't Everything: Hold Some Back for Escrow and Closing Costs
You've saved up a nice nest egg for your down payment, and you're probably doing constant calculations on "how much house you can afford." But wait! Most first-time home buyers don't realize that there's more out-of-pocket cost than the down payment itself. You will wind up putting 1%-3% down in escrow and may pay 1%-3% in closing costs as well. Be sure to hold enough back for these expenses before you pour everything into the mortgage.
3. Fresh Paint Can Hide Poor Repair: Take Full Advantage of Inspections and Contingencies
If you fall in love with the beauty and charm of a house, don't commit right away. A pretty paint job can cover some pretty unpleasant surprises. Beautiful staging can dazzle the eyes, but always be prepared to complete your "due diligence". That means bringing in an inspector (maybe more than one) and holding on to your negotiation contingencies. If the inspector finds a problem that can't be fixed affordably or quickly, those contingencies let you back out of your initial offer on the "lemon" house.
4. Not All Mortgages are the Same: Shop Around for the Best Mortgage Lender
Most first time home buyers don't realize that a mortgage isn't quite an off-the-shelf product. Every lender has their own risk and interest calculations, and it's rare that your first mortgage offer will be the best available to you. Savvy home buyers shop around with local and online lenders until they find the best deal.
Remember, your mortgage is a long-term investment and better terms or lower interest rates will benefit you for 15-30 years after you close on your new home.
5. The Future is Around the Corner: Plan Every Detail of Your Financial Lifestyle as a Homeowner
Lastly, be very careful with what your finances look like after you buy the house. Can your income effectively cover the mortgage, property taxes, home insurance, and the usual cost of living? After escrow, down payment, and closing costs - will you have enough in savings to handle your moving expenses and any final repairs or updates to the house?
Don't leave yourself with a nice home and thin finances. With careful calculation, you can settle very comfortably into a beautiful new home, able to financially relax and truly enjoy that first year of being a homeowner - and many years to come.
Are you ready to dive into buying your first house? First Savings Mortgage can help you find a great mortgage, avoid classic first-time buyer mistakes, and settle with satisfaction into your new home.