Avoid These Common First-Time Home Buyer Mistakes

Avoid These Common First-Time Home Buyer Mistakes

  • The Nolting Team
  • 11/23/22

Home buying is a process most people will go through at some point in their lives. As with most things, it gets easier with practice, but in the meantime, for those who are beginning the process of buying their first house, there are a lot of things to consider. It can be easy to take the wrong step or miss something important. Here are some of the most common mistakes to avoid for first-time home buyers looking for single-family homes for sale in Columbus, Indiana.

Not saving money

In preparation for buying a house, saving is the first step, but many first-time home buyers skip it or move forward before they have saved enough. A lot of expenses go into buying a house, including the down payment, homeowners insurance, utility bills, property taxes, moving costs, the mortgage, and sometimes homeowners association fees. There will also be closing costs which are typically three to six percent of the purchase price. Today, many people will save for an average of 3.75 years before they buy their first house. Buyers should take their time and save a considerable sum.

Not getting approved early

In general, the sooner a buyer starts the approval process, the better. Pre-approval has many benefits. Firstly, it is a quick and accurate method of seeing how much the buyer can spend on a house, providing a dependable price range. In addition, pre-approval can look good to sellers, making the buyer seem serious and reliable. This can be helpful during bidding wars.

Looking at one mortgage rate

To get a mortgage rate quote, the buyer will provide financial documentation and talk with a professional. As the process can be time-consuming, first-time buyers will often only do it once and take the first quote they can get, which is a mistake because comparing quotes can get them a better deal. Like shopping for any expensive item, it is a good idea to compare the options and offers. Interest rates, closing costs, and discount points depend on the lender, so each lender will have a different offer. Getting multiple mortgage rate quotes will help the buyer find the best deal.

Not considering government loans

Many first-time buyers only think about conventional loan options, but other loan types can be more affordable. If the loan is backed by the government instead of the homeowner, the lender has the security to make a better deal. The most common government loans are FHA loans, VA loans, and USDA loans. FHA loans, created by the Federal Housing Administration, will have more favorable terms because they protect the lender from a loan default. VA loans help veterans, surviving spouses, and active-duty members get a mortgage, and USDA loans are available in rural areas and backed by the Department of Agriculture.

Making emotional decisions

It is always easy to get excited about a great house and leap at the opportunity without thinking, especially for first-time home buyers. Taking a step back, looking at the facts, and thinking about the decision logically is essential. Of course, the buyer should love the house, but emotion should not be the only thing going factoring into the decision.

Bad timing

Some first-time buyers will rush into a purchase without looking under the surface. All buyers should be sure they want the house before making an offer, as it can be difficult to back out once an offer has been made. Other first-time buyers will hesitate, waiting for their dream home and missing other great options. If they are too picky, they may never find a house. The trick is to balance the two extremes and find the right timing.

Buying too big a house

The pre-approval will give buyers an idea of how much house they can afford based on their debt-to-income ratio (DTI). This does not necessarily mean the amount is a good price, as the DTI does not include expenses like utilities, insurance, repairs, and groceries. Buying something too expensive can lead to difficulty later. Home buyers should only look at houses within a good price range.

Spending all their savings

Some first-time buyers will use the entirety of their savings to buy their house, which is short-sighted. Many times there will be unexpected costs soon after purchase, and savings will be needed. Buyers should never leave themselves with no money for emergencies.

Making the wrong down payment

Many first-time homeowners believe the best down payment is 20% of the purchase price, but this is a myth. Today, the average down payment is only 6%, which can often be lower. When a buyer pays less than 20%, they will need to pay for private mortgage insurance, protecting the lender from defaults.
However, the owner can discontinue this expense once they reach 20% equity. Many new homeowners will have a hard time paying a full 20% upfront, but it is generally considered best to make as big a downpayment as they can afford in order to have a smaller mortgage. Deciding exactly how much to spend on a down payment depends on the person and situation.

Waiving a home inspection

The home inspection is a clause in a contract that allows the buyer to be able to back out of the deal if something significant is found wrong with the house or have the seller pay to fix it. Skipping this step can make the buyer attractive to the seller in bidding wars, but it is a mistake. Inspections find at least one issue with the house 86% of the time. If the buyer is stuck repairing the problem themselves after purchase, they may lose thousands. Finding these issues before the deal goes through gives the buyer negotiating power.

Not using a realtor

A real estate agent’s job is to help the buyer get through the process to the best deal possible with minimal stress. They are experts in real estate and know all the tricks and potential traps of the trade. First-time home buyers will greatly benefit from having a realtor helping them through research, showings, negotiations, and contracts.

The Nolting Team

For people looking for Columbus, Indiana, real estate, The Nolting Team is an experienced, mother-daughter realtor team. They pride themselves on stellar customer service, reliable response times, and stress-free solutions.

Contact The Nolting Team today to begin buying your first home.

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