3 First-Time Homebuyer Mistakes to Avoid: Don't Make These Rookie Errors!
Buying your first home is a huge milestone in life. It's a time of excitement and new beginnings, but it can also be extremely daunting and stressful if you're not prepared. There are many things to think about when buying a home and, of course, there are also plenty of mistakes that first-time homebuyers should try to avoid. In this article, we'll discuss 3 main first-time homebuyer mistakes to avoid! So read on and learn from others' mistakes so you can have a smooth and successful home buying experience!
1. Contacting a Realtor Before a Mortgage Lender
You wouldn't go shopping for groceries without knowing how much cash you had in your wallet would you? It's the same thing when it comes to buying a home. Without having a conversation with a mortgage lender you're not going to know how much home you can afford. To establish your purchasing power straight away and avoid wasting both yours and your realtor's time; the last thing you want is to get emotionally connected to a property to later find out you can't afford it. Avoid the heartbreak and make the first call to your mortgage lender.
2. Thinking You Need 20% Down
The idea that you must put down 20% is (often) a myth. While a 20 percent down payment does assist in avoiding mortgage insurance, many homebuyers nowadays do not want to (or are unable to) make such a substantial commitment. Holding off from buying a home to save 20% might take months or even years, and it may prevent you from achieving other financial objectives such as increasing your retirement savings, maintaining an emergency fund, or paying down high-interest debt. If you're looking to purchase a home with as little money down as possible there are several options available for you.
3. Focusing Too Much on the House and Overlooking the Neighborhood
Of course, you want a house that ticks all of your must-have boxes and meets your needs. If you choose a home based on its aesthetics, however, being picky may be short-sighted.
The objective is for you and your family to find a neighborhood that shares your culture and beliefs. You can always swap locations, add a third bathroom, or renovate a cellar as your circumstances change. From a financial perspective, when thinking of your home as an asset it's never a good idea to be the biggest fish in a small pond. In other words, you don't want to be the best house in the worst neighborhood.
Generally speaking, when properties are evaluated and appraised, appraisers typically go by something called the sales comparison approach. They look at similar properties in your area that recently sold and that gives them an indicator as to what your property will be worth. If your home is a unicorn, meaning it's way better than anything else in the immediate area and appraisers can't find any comparable properties that are never good news for your property value.
Similarly, if the appraiser finds a property that matches the same property type, square footage, etc. then you best believe whatever that home recently sold for is going to be very close to what your property will be valued at. Your updated kitchen and nice finishes won't make too much of a difference so don't overpay for it. My recommendation is to focus on the neighborhood first and you can upgrade the property later.