First-timers can be eager to jump into home ownership. But we see them committing the same mistakes, time and time again. Here are some of the most common ones
1. They’re unprepared to compete against all-cash offers. Buyers need to be ready to make a quick decision if they’re housing market is heating up. Buying a home is really like finding a job – it’s going to take a lot of time to prepare, and when the deal comes along, you’re ready to pounce on it. buyers should have already saved as much as possible for a down payment, repaired any credit report blemishes, and gotten preapproved for a loan as they start their house hunt to put them in a better position to compete.
2. They place a car ahead of the home. Lenders are going to scrutinize applicants’ debt-to-income ratio when assessing how well they can afford a mortgage payment. Consumers’ debt has gone on average from $40,000 in 2010 to $61,000 today. It would be much easier to own a home if you can show a history of saving and not have gotten yourself into too much debt.
3. They place too much emphasis on online loan information. Online sites can be good for finding out general information about loan products and estimated costs, but experts recommend visiting with mortgage lenders face-to-face to help demystify some of the process and to take into account your specific situation. Go to different places and talk to loan officers to get a feel for what the differences are between similar types of loans. Sometimes a company won't charge an origination fee, but then the interest rate is higher … and in some cases you can put many of the upfront costs—closing costs, title insurance—into the loan, which makes your balance larger.
4. They bank too much on online home values. Some real estate websites are giving buyers a false sense of home values. If a buyer believes that the actual value of the property is $1.1 million [as listed online] when it's really $1.3 million, it's a real disservice to the client. You really should [spend time] with someone that understands the market, someone who's there day in and day out. Home buyers can get the best feel of the market by working with a real estate agent and driving around neighborhoods and get a sense of things about homes that may be less valuable or even more valuable than perceived online.
5. They forgo the home inspection. About 10 percent of homes recently purchased weren’t inspected by a home inspector. Some buyers were trying to cut down on the costs of hiring an inspector to investigate a home – which usually averages about $450 — but defects uncovered later could potentially result in the loss of thousands of dollars. "It takes a trained eye to be able to see the problems that can exist in a home. The inspection can also give the first-time buyer a bit of a schooling on the house and how to maintain it. Buyers should also be prepared to ask questions about conditions that are common to specific areas, such as radon; sewer lines in older homes; and active clay soils in some locations that can lead to foundation issues. The home may also require additional inspection from a specialist to rule out potential problems.