10 First-Time Home Buyer Mistakes
As you think about getting your first home, you’re probably hearing a lot of advice from your friends and family. Anyone who’s been through the process knows just how stressful it can be, and they want you to avoid all of the pitfalls.
- Choosing a Fixer-Upper
- Discounting the Idea of a Brand-New Home
- Incorrectly Estimating Mortgage Payments
- Forgetting to Include Costs of Living in Your Budget
- Focusing on One Aspect of a Home
- Thinking You’ll Move Soon
- Not Planning for the Commute
- Overestimating the Amount of Equity You’re Building
- Not Comparing Mortgage Rates
- Making Changes After You’ve Gotten a Price Quote
We’ve put together this list of common mistakes that first-time home buyers make to help you make sense of the process.
1. Choosing a Fixer-Upper
First-time buyers often don’t have a large down payment, and this usually leads them to look at homes that are more affordable. Any home that seems to have a low price for the size of the home or its location is immediately attractive, even if there are a few flaws. Be wary of this situation. In many cases, fixer-upper homes are more trouble than they’re worth. Once you move in, you could end up paying tens of thousands of dollars on repairs.
2. Discounting the Idea of a Brand-New Home
There’s no doubt that some brand-new home styles are more expensive than resale homes, so first-time buyers tend to leave that option off the table. However, a new home can be more affordable than you realize. Energy costs are often lower, and you won’t have to pay for repairs. You need to look at the entire cost of the home to see which style might be the best for you.
3. Incorrectly Estimating Mortgage Payments
Long before you get serious about buying a home, you might start looking at mortgage calculators to see what you can afford. What many first-time home buyers don’t realize, though, is that the monthly payment will also include property taxes, homeowners insurance, and sometimes some other costs. This can significantly increase the amount of the payment. If your calculator isn’t including these costs, you’re looking at homes out of your price range.
4. Forgetting to Include Costs of Living in Your Budget
It’s not uncommon to estimate a future budget based on current costs. However, certain costs are sometimes included in a rent payment, and you’ll have to pick up those costs once you move into your own home. These things might include garbage disposal, water, heating, electricity, internet, cable television, and lawn service or snow removal. If you aren’t planning for those costs, you’ll soon find yourself in a financial pinch unless you make room in your budget for them.
5. Focusing on One Aspect of a Home
It’s best to keep an open mind when you’re home shopping. First-time buyers often get fixated on a certain thing they think they want, and this can mean they miss out on a great deal elsewhere. For instance, let’s say that you think you want a home with at least 1,800 square feet. Homes that start with this much space could be just out of your price range. You could save money by purchasing a 1,500 square foot home and finishing the basement.
6. Thinking You’ll Move Soon
It can be hard to find everything you want in a single home, especially if you’re trying to stay within your budget. First-time home buyers have a tendency to sacrifice some strong wants or light needs with the idea that they’ll move into a better place after five years. This rarely works out as planned, and the family is stuck in a home they feel is sub-par.
7. Not Planning for the Commute
You can spend a lot of time commuting to work. Some people don’t mind a long commute if the community and home are perfect. Others are hyper-focused on finding a place that’s only 10 minutes away from where they work. Remember, though, that things change over time. The best community will be close to your place of work, but also close to a highway entrance so that you’ll be able to easily get anywhere in the city. You’ll be happy to know that commute times in the communities we build in are manageable and thanks to Anthony Henday Drive, you can quickly get to where you need to go.
8. Overestimating the Amount of Equity You’re Building
Everyone knows that the great thing about owning a home is being able to build up equity.Each monthly payment increases the amount of the home that you “own”. Unfortunately, due to amortization, a large percentage of the monthly payments in your first years of homeownership goes toward the interest on the mortgage. You are building up equity, but unless you’re making extra payments, it will take some time to start paying more towards your principle. The longer you live in the home, the faster you build up the equity.
9. Not Comparing Mortgage Rates
The interest rate on your mortgage affects the monthly payment and how much you pay overall. You want to get the lowest rate possible. Too many first-time buyers don’t take the time to compare mortgage rates. They might pick the company that has the lowest advertised rate, but the actual rate you pay could be much different. It can be time-consuming to apply for a mortgage to a few different companies, but the effort could save you tens of thousands of dollars.
10. Making Changes After You’ve Gotten a Price Quote
First-time buyers who are building new homes are excited about being able to design the home themselves. They sometimes forget that certain decisions come with higher prices. When you buy a new home, you’ll get an initial quote based on the selections you make in the beginning. If you choose a lot of upgrades after you received a quote, you might end up spending more than you imagined, so it’s smart to ask what is included in the model you select as is.
Buying your first home is exciting, but you have to remember to be careful about the decisions you make. If you avoid these mistakes, you’ll be in great shape to get the home you want within your budget and be better prepared for the home buying process!