Purchasing a home is a blissful event, particularly when you are buying for the first time. In the excitement of the purchase, it is natural to become blinded by the beautiful granite and quartz counter tops, hardwood floors, and fenced-in backyards. While looking at these magnificent homes that are absolutely “perfect in its entirety” , you may start to begin rationalizing a larger purchase than you had initially prepared for. “This house is just perfect for me and my family; it is only worth $40,000 extra for me to have a house with adequate space in an impeccable location,” or, “We were planning on spending a slightly more money on painting and redecorating a house; so we might as well just spend an $40,000 dollars extra on this house since it does not need any work.” These are common phrases that many homeowners say when looking at their dream home. Well, in reality, there are a few things that homeowners must realize when purchasing a home. Mistakes if you will..
Here are the five most common mistakes first-time home buyers make:
Primarily looking at only 1 single property. It is important when looking for a house that you know precisely how much you can spend on a property. There are various online calculator tools you can use, however remember these tools are only estimates. Use these tools as a guide, as you can adjust the amount based on your individual situation. Ask yourself, how much is your current rent payment? Did you meet that payment each month with ease, or was it a bit of a struggle each month? The payment you can afford right now is a good indicator of what you will be able to afford in your new home.
Consult with a lender(United Financial Counselors and Jason Walowitz) and get pre-approved for an amount you can afford to spend. Note, it is best to lean towards a lower amount, rather than a higher amount. You do not have to necessarily use the entire amount you are pre-approved for. Once you know how much you have to work with, then and only then, should you begin your house search.
2. Counting Chickens Before They Hatch
When deciding on how much you can afford on your mortgage monthly, you should base this amount on what you are currently earning (the income you and your spouse are currently earning from secure sources). Do not presume you might be getting a promotion and earning much more money in a year or two, so you can afford a larger payment. Do not base your mortgage payment on either of your potential salary increases. The future is unpredictable and although you may very well be in a better financial situation a year down the road, there is no guarantee.
3. Failing to Account for Closing Costs, Property Taxes, HOA, and Homeowner’s Insurance
When you plan on renting a home, you normally have an initial payment, a monthly rent payment, and then maybe renter’s insurance which is optional. When you are buying a home, your mortgage payment is only the starting point of a bunch of costs. Florida homeowner’s insurance fees can be quite low or very high depending upon where you reside, along with comforts and services offered.
Florida homeowner’s insurance and property taxes are based on your geographical location. Florida has notably high homeowner’s insurance rates, which are average $165 per month. In Connecticut, rates are much lower, averaging $95 per month, according to Value Penguin.
4. Failing to Protect Yourself with Home Inspections
While you are searching for a house, you may come across a house that looks great at a first glance. Then, as you walk through a few of the rooms, you notice a mess in the house – maybe the kitchen island is not in an open corner, or the floors creak and make noises. As you walk further, you may notice the walls are dirty and chalked with colors. This is when you start to doubt the particular house.
A thorough home inspection provides you with some protection. The inspector will be able to find problems that you cannot and will help you to learn about these problems before you sign on. “The seller isn’t likely to tell you that there is mold in the basement or that the walls are poorly insulated,” reports MSN.
5. Being too Naive or too Paranoid
Some first-time home buyers are naïve and become overly optimistic, thinking nothing could possibly go wrong. If a home has a few problems, they might believe that they can be fixed easily. On the other hand, paranoid buyers may believe the price is an inaccurate estimation of the house’s market value. They might even buy a home without consulting an agent, which is generally an unwise choice.