Buying a home is always an amazing but sometimes anxiety-ridden process, especially when it is your first time. There’s so much to do and so much you don’t know that it can feel overwhelming.
You should never be afraid to buy a home, but you still need to be wary of falling into a few common traps that first-time buyers often fall into. If you’re aware of these five potential mistakes, it can alleviate some significant stress on your home-buying journey.
1. Not understanding your down payment options
The biggest headache for so many first-time buyers is the down payment.
- There are many options, from $0 down to 20%. If you are a Veteran you can take advantage of your VA benefits for a zero-down home loan with no monthly mortgage insurance. Other options include FHA loans with as little as 3.5% down. States like Idaho also have low down payment options. If you don’t have a certain amount to put down on your home loan, however, you might find yourself paying private mortgage insurance (PMI) on the lifetime of the loan.
- Depending on your credit score, the bank and other factors, PMI could cost between 0.5 percent to 1 percent of the total loan amount.
- Most mortgage lenders require at least a 20% down payment before they will waive the need for PMI on the loan. However, talk to one of our trusted lenders to see if you qualify for other programs that may have better options.
- As mentioned above, some state and federal government organizations and lenders try to incentivize first-time homeownership by offering free down payment grants or loans to qualified buyers. Depending on your age, income level, credit score and other factors, you could qualify for free money to wrap into your down payment. Idaho Housing And Finance Association (IHFA) has some amazing first time buyers programs such as borrowed or gifted down payments for qualified buyers. All of our preferred lenders work with IHFA and can help get you prequalified.
2. Not getting prequalified for a loan
Between the amount of money you plan to put down on the home, the potential PMI and other cost factors such as closing costs, your monthly cost could be significantly more (or possibly less) than some of those calculators will show you online.
So before you trust those “estimated monthly mortgage loan amount” numbers that you see popping up next to your potential new dream home on Zillow or a brokerage website, it pays to figure out what you can actually afford -- and that means getting prequalified for a home loan.
This means you will need to talk to one of our preferred mortgage loan officers. They will have you provide documentation from your monthly pay stubs to your credit score, in order to tell you how much money you can get for your home loan. It’s a little bit of work, but the prequalification letter you’ll get as a result is much more credible than a quick qualification you can pull up on an app -- and that means sellers will take it more seriously when it comes time to put in an offer.
3. Not finding a qualified real estate agent
It’s so easy to find homes online these days that you may wonder why a real estate agent is even necessary. After all, isn’t finding the place you want to buy something you can do yourself?
Well, maybe. But in areas with red-hot markets, you’re probably not seeing the most updated listings -- that home you just fell in love with online might be under contract before you can set up a time to tour it.
Not only can an agent make sure you have access to listings the second they hit the MLS, but a qualified agent should also provide expertise on the area where you want to move. Whether that’s feedback on who can help you with homeowners’ insurance quotes to warnings about some of the frequent pitfalls of owning a home in that neighborhood in particular, a qualified agent is an invaluable resource.
4. Not getting to know the neighborhood
If it’s at all possible, see if you can find an Airbnb or another vacation-rental type of setup where you can stay for a few nights to get a better feel for the area. If you are visiting from another state, work with your agent to find a hotel or Airbnb in the area that you will be looking for homes.
- Where are the closest restaurants, schools, grocery stores, parks, rec centers and hiking trails?
- What are the noise levels? If there’s a train that rolls through town in the early hours of the morning, you’re near a highway or a flight path -- and any of that is going to disturb you -- then it’s best to figure it out before you’re spending your first night in your new home and wake up to unpleasant noises.
- At the very least, you should spend a few days at different times, driving around the neighborhood to learn as much as possible. From typical traffic conditions, to commute times for work or school.
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5. Not understanding what’s fixable and what’s a deal-breaker
Those drop panels in the ceiling are hideous, and you can’t imagine how anyone can fit into that tiny bathtub. Are those annoyances that can be fixed or deal-breakers that mean you should pass on the property entirely?
This is another area where a good real estate agent can help. They see so many houses in various stages of repair and updating that they can show you where you can claim another foot or two for bathtub space (and help you figure out how much it will cost and who’s trustworthy enough to take on the job) or let you know that the ceilings are too low for any changes to make much of a difference.
None of these mistakes will keep you from buying a home of your own -- but they could delay the process and cost you hundreds (if not thousands) of dollars at the end of the day. But if you’re able to avoid them, you’ll be signing the closing papers on your dream home before you know it!
And a good agent will help you understand the difference between routine maintenance issues and significant structural, health and safety, or mechanical issues that can make or break a deal during your inspection process.
