Top 9 Biggest Mistakes of a First Time Homebuyer
The Top 9 Biggest Mistakes of a First Time Homebuyer are items I’ve been witness to over the course of my nearly 7 year career in real estate. Many of these items are things I’ve heard other agents and brokers discuss, feedback from consumers, as well as my personal experience.
First time homebuyers don’t apply for downpayment assistance or loan programs
First Time Homebuyers don’t account for new assessed value property taxes
They purchase their home because they think it’s a smarter financial decision than renting
First Time Homebuyers work with a new or part time agent
First Time Homebuyers don’t shop lenders
They just do a general home inspection
First Time Homebuyers don’t ask for a seller concession
First Time Homebuyers don’t put 20% down
They don’t account for extra costs
1. They don’t apply for any downpayment assistance or loan programs.
Eligible home buyers could qualify for grants, tax credits or coverage of their downpayment and/or closing costs. The availability of these offerings vary by state. These programs are offered by federal, state, county or local government agencies, nonprofits or employers. It’s definitely worth it to do some research and see what you could qualify for based on your occupation and financial situation. It’s kind of like searching for scholarship to go to college.
2. They don’t account for new assessed value property taxes
Most lenders qualify a buyer and establish their monthly mortgage payment based on the homes property taxes from the previous year. The problem with this is when a home changes ownership, it is reaccessed by the county appraiser and the new assessed value is what property taxes are based off of.
This is especially important if the seller of the home you are purchasing has owned for a really long time, or if the property has seen significant improvement, like a flip. Their property taxes are based on a value significantly lower than the current value which could more than double your annual property tax bill.
Many buyers aren’t finding out the increase tax amount until they’ve owned the home for a year and their mortgage payment increases to cover the difference.
If this is your primary residence home make sure to apply for Homestead Exemption and if you are moving from another home you owned utilize the portability credit. Click here for a blog specifically about Property Taxes.
3. They purchase their home just because they think it’s a smarter financial decision than renting
Buying a house can be a liability, and a huge financial responsibility.
When you rent you pay a set amount each month to a landlord who takes care of all repairs, maintenance, insurance and taxes. When you rent, especially if you’re in an apartment, your electricity and water bill are significantly less than they will be in a home.
You will hear realtors tell you to stop flushing money down the toilet renting and purchase a house you can build equity in. You probably feel the societal pressures to own a home instead of rent..
Just make sure you are financially ready to purchase a home, have cash for repairs, maintenance, your downpayment and closings costs. And keep I mind, when you obtain a mortgage right now at 7% interest, with property taxes, and home owners insurance you’re hardly paying down your principal balance.
Renting makes more sense for some people.
4. They work with a new or part time agent
I’m beyond grateful to buyers who gave me the opportunity to gain experience as a new agent. Without the people who gave me a chance I wouldn’t be heading into year 7 with experience under my belt. However, it’s incredibly important to work with an experienced agent, this person will be walking you through likely the biggest investment of your life. You need someone who does more than just knows your area, can open a door and write a contract. Terms, negotiations, deadlines, strategies, credibility amongst peers, it all equates to getting you the best deal and providing the most transparent process.
Although you might be tempted to use your friend or cousin who just got licensed.
5. They Don't Shop Lenders
Don’t get your approval with multiple lenders as they’ll all pull your credit. Literally make sure to say “don’t pull my credit yet.” You can provide documents and explain your financial situation to get an approval estimate from multiple lenders. I recommend this because there are loan program, downpayment options, credits, and different fees associated with different lenders.
6. They just do a general home inspection
When you go under contract on a home you have a window of time (7-15 days) called the due diligence period (inspection period). During this time most buyers get a General Home Inspection and a 4 Point inspection (for home owners insurance). The general home inspection is extremely thorough and will inspect the home from top to bottom providing a beautiful report with photos and recommendations. Most buyers stop here. Which many realtors prefer because the more inspections you get done the higher the change you’ll find something that will cause the deal to fall through, and realtors want to get paid. However, I would rather not get paid then have you in a house with some hidden issue that wasn’t caught because we didn’t order extra inspections.
Extra inspections most buyers don’t opt to get that I would 100% add on and have done during my due diligence period include:
- Termite Inspection
- Mold Inspection
- Sewer Scope Inspection
- Wind Mitigation Inspection
- Sinkhole inspection
- Pool Inspection
- Seawall Inspection (If you live on the water)
- Well Inspection
The inspector can also recommend further inspection if he notices something which needs an expert in that field to inspect. For example if he notices questionable structure under the house he will recommend a structural engineer to inspect.
7. They Don't ask for a seller concession
A seller concession is kind of like cash back. It’s a credit from the seller which can be applied to your closing costs or downpayment. If you’re offering $340,000 with 3% Seller concession, the seller is really seeing an offer at 329,100 as you would get $10,900 credited to you at closing. This money is best used applied to closing costs, downpayment or a rate buy down.
8. They don’t put 20% down
You don’t HAVE to put 20% down to purchase a home. But if you don’t, you have monthly PMI (Private Money Insurance) which is a figure based on your credit worthiness AKA how much the lender trusts you. It can be upwards of $200 per month. Also without a significant downpayment, your monthly mortgage payment with all things considered could be high $5000 depending on the cost of the home.
9. They don’t account for extra costs
When you’re purchasing a home there are extra costs to close as well as added costs once you’re an owner.
Extra costs to buy a home:
- Home inspection $500-$1000
- Appraisal $400
- Closing costs 3% of the purchase price
Extra costs when owning a home
- Increase in Utilities
- Property Taxes
- Home owners insurance
- Yard maintenance
- Repairs
- Furniture
- Hurricane prep
Purchasing a home is a HUGE milestone and an incredible achievement. I want you going into it with more information than you probably need. The point in sharing “The Top 9 Biggest Mistakes of a First Time Homebuyer” is to inform and protect the buyer. These days it does’t feel like anyone is on your side, it’s hard to trust anyone with your money. Because of that I want you informed, involved, and feeling safe having someone on your side looking out for your best interest.
I’m here to protect my buyers and get them the best deal in this investment and I will fight tooth and nail for your desired outcome.
Reach out if you want to chat or have any questions. Happy to be a guide whether we work together now or far into the future!
Connect with me..
