Shopping for a new home is both exciting and challenging, especially if you’ve never owned a home before. It’s wise to spend some time reading through advice for first-time home buyers before you begin looking at online listings and scheduling in-person showings. This article will identify several of the common mistakes first-time home buyers make when shopping for a home. By knowing what these mistakes are, you can avoid falling into the same traps.
1. Waiting too long to start the approval process
In order to secure a loan to purchase a home, a lender will need to feel confident about your ability to pay back the money. When you officially apply for a loan, you’ll go through an extended underwriting process that will fully evaluate your credit history. However, many home-buyers also choose to apply for pre-approval before they begin seriously looking for a home. Pre-approval happens when a lender uses basic personal information such as a social security number, credit score, and debt-to-income ratio to determine what sort of loan you may be able to afford. They might even give you a pre-approval letter when the process is done. This is significant because it gives you (and the seller) confidence that you likely won’t run into issues getting the loan after the home is under contract. However, if you wait too long to receive pre-approval, you may come across issues that you were not aware of when you began shopping for your home. You don’t want to fall in love with a home only to realize that you can’t afford it.
2. Looking at just one lender
Perhaps you’re familiar with the concept of federal interest rates. While this does come into play in a major way when shopping for Ahwatukee homes for sale, it does not mean that every lender will offer you the same rate. Too many buyers choose to borrow from the first lender they speak with without evaluating the market and determining if this is the best rate that they can get. Talk to 2-3 lenders (at least) before making a final decision. While it may seem unimportant now, it can save you tens of thousands of dollars of interest in the long run.
3. Being unrealistic about what you can afford
When a lender evaluates your qualifications for a loan, they primarily look at your debt-to-income ratio to determine how much income you have at your disposal each month. This means that they may pre-approve you for a higher loan amount than you expect. However, they are only looking at your income – they are not taking expenses into account. A good way to consider how much you can spend on a home is to use an online mortgage calculator to estimate what your monthly payment could be.
4. Waiving a home inspection
In a competitive market, some buyers will offer to waive or forgo the home inspection as a tool to make their offer more lucrative for the seller. Generally speaking, this is a bad idea. When an inspection happens, an inspector comes onto the property to check everything from the insulation to the electrical systems to the plumbing. If they come across significant issues in any of these areas, it could cost tens of thousands of dollars for you to make the repair yourself. Your seller might consider renegotiating with you, but it still adds major inconvenience to the process in addition to slowing down the sale’s finalization.
5. Not having (or keeping) enough in savings
Moving into a house can easily drain your pockets. When you come to closing, you will need to have sufficient money for a down payment. If you go with an FHA loan, you only need to have a down payment of 3.5% of the total cost of the home. This is incredibly helpful for first-time home buyers since many of them may not be able to afford the traditional 20% down payment. FHA loans require certain stipulations to be met, such as a minimum credit score. In addition, you’ll need to have between 2% and 4% of the total price of the home for closing costs. The exact amount varies inside each transaction and is a split responsibility between the buyer and the seller. Finally, there are various charges you’ll have once you take ownership of the property, such as small maintenance projects, as well as new furnishings and supplies. Don’t be surprised if you make several trips to your local home improvement store in the first few weeks after moving. All of these expenses can quickly add up, so it’s wise to have a large nest egg built up when you decide to purchase a home.
6. Not researching the neighborhood
7. Going through the process alone
If you’re interested in having a realtor work with you throughout your home search, consider reaching out to one of the talented agents with The Santistevan Group. They are regarded as one of the top producing groups in the entire state of Arizona, and they are committed to supporting and guiding each of their clients with professionalism and genuine care. They look forward to hearing from you, and they can offer plenty of advice for first-time home buyers as you move forward.