If you’re a first time home buyer, especially one who has waited years to buy a home, you may have a day dream about the perfect house. Maybe you picture a cute bungalow with a nice garden in the backyard with room for the kids to play. Perhaps you imagine a flower lined walkway and a picket fence.
While daydreams are nice, and you may actually find a home just like you imagine, you also should remember that as a first home buyer, you face a steep learning curve. If you’re not careful and don’t do your research, you could make a major mistake.
Here are some pitfalls to avoid:
1. Not knowing what you can afford
Even in this environment, banks may be more lenient and say that you qualify for more than you can comfortably afford. The best way to decide how much you can truly afford is to set aside money now for your mortgage payment, before you buy a home. For instance, if your current rent is $1,000, but you want a home that will cost you $1,700 a month in mortgage payments, start setting aside the difference of $700 a month now. Do this for 6 to 12 months to see if you can truly afford the loan amount you would like.
2. Failing to consider additional expenses
Unfortunately, your monthly home loan payment is only one expense associated with home ownership that you’ll have to pay. There are many more expenses. You’ll also need money for property taxes, homeowner’s insurance, repairs, and routine maintenance. If you didn’t have 20% down to pay, you likely will also have to pay private mortgage insurance. Don’t be surprised if these expenses add as much as $500 to $2,000 additional monthly to your budget.
3. Being too picky
You may have your daydream about your perfect house, but recognizing that no house will meet all your needs is important. Be flexible when choosing a property and remember to offset the price with what you’re getting. Often low cost, cosmetic fixes may be all you need to make a property you weren’t enthusiastic about more homey. Compromising on your wants can help you afford a home in your price range.
4. Don’t compromise on important things
Having said that, remember what is truly important. If you work from home full-time, you’ll likely need a home office. Compromise on this important feature, and you may regret buying the property. If you have one child but plan to have another in the future, you’ll likely need a 3 bedroom rather than a 2 bedroom home.
5. Don’t go through the process alone
Buying a home is an overwhelmingly complicated process. However, you don’t have to do it alone. A qualified mortgage broker can help you through the process as well as help you find the best mortgage for your situation. Mortgage brokers can save you time and energy. Best of all, they usually provide their services free to the consumer. There’s really no reason not to hire a mortgage broker.
Congratulations on taking the leap to homeownership. The process can be intimidating, but if you do a little research before you begin the buying process and follow this advice, you can make buying a home much easier.