Buying a home is exciting, especially when you’re buying for the first time!

Keeping these 5 details in mind will make for a more pleasant home buying experience.

1. Overspending

2. Counting chickens before they hatch

3. Failing to account for closing costs, property taxes, HOA, and homeowner’s insurance

4. Failing to protect yourself with home inspections, contingency clauses, etc.

5. Being too naive or too paranoid

  • 1. Overspending – Before you even look at a single property, you need to know exactly how much you can afford. There are several online calculator tools you can use, but these tools are only estimates. Use these tools as a guide, but then adjust the amount based on your individual situation. How much is your current rent payment? Did you meet that payment each month with ease, or was it a bit of a struggle each month? The payment you can afford right now is a good indicator of what you’ll be able to afford in your new home. Meet with a lender and get pre-approved for an amount you can afford. Also, keep in mind that it’s always better to lean towards a lower amount, rather than a higher amount. You do not have to use the entire amount you’re pre-approved for. Once you know how much you have to work with, then and only then should you start your house hunt.
  • 2. Counting chickens before they hatch – When determining how much mortgage you can afford, base this amount on what you are earning today. That is, the income that you and your spouse earn from stable sources. If you’re in your last year of law school, for instance, don’t assume that you will be earning much more money in a year or two, so you can afford a larger payment. If your wife is expecting a big promotion, don’t base your mortgage payment off of her potential salary increase. No one can predict the future, and although you may very well be in a better financial situation a year down the road, there is no guarantee.
  • 3. Failing to account for closing costs, property taxes, HOA, and homeowner’s insurance – When you rent a home, you generally only have one payment — rent — and then maybe renter’s insurance, which is optional. When you buy a place, your mortgage payment is only the beginning of an array of costs. Homeowners insurance and property taxes vary based on the city or town. Then on top of all of those costs, if your down payment is less than 20% of the selling price, you may end up paying an additional cost — private mortgage insurance (PMI) — which is basically insurance for the lender in case you default on your loan.
  • 4. Failing to protect yourself with home inspections, contingency clauses, etc. – During your house hunt, you may find a house that looks great at first glance. Then, as you walk through a few of the rooms, you notice problems with the house — maybe the floors squeak or the kitchen island is off-centered. After walking through the house, you come to realize that someone simply put lipstick on a pig, and this house is in questionable shape.
  • Home inspections provide you with some protection. The inspector will be able to find problems that you can’t and you want to know these problems before you sign on the dotted line.

    Contingency clauses also offer a form of protection. A mortgage financing contingency clause protects you if, say, you lose your job and the loan falls through or the appraisal price comes in less than the purchase price. Should one of these events occur, the buyer gets back the money he used to secure the property. Without the clause, he can lose that money and still be obligated to buy the house.

  • 5. Being too naive or too paranoid – Some first-time home buyers are naive. Overly optimistic, they think nothing could possibly go wrong. If a home has a few problems, they view them as easy fixes and are unrealistic when it comes to the cost and time it takes to fix up the home. Some naive buyers will move to a neighborhood on the wrong side of town, forgetting that you can fix up a house, but you can’t change your neighborhood or location without moving. Paranoid buyers may not believe the price is an accurate assessment of the house’s market value. They’ll submit low-ball offers and then show frustration when they are consistently rejected. Paranoid buyers don’t trust the professionals they are working with, the real-estate agents and mortgage people, and won’t take the advice given as they feel “they know better” and “you are just trying to sell me something”. The comparables of past sales indicate the proper pricing and following the advice and guidance of your Realtor will get you into your new home!
  • Buying your first home should be an exciting, scary, happy time! With the proper advice and guidance from a skilled Realtor you should feel comfortable in the process. There are an array of different mortgage programs available to help you achieve your dream of homeownership. Call me so we can start the process now!!