Main Content

Mistakes to avoid when buying your first home

Woman holding a mini house

It’s easy to get caught up in the excitement of buying a home for the first time. However, the process can be just as overwhelming for first-timers. It’s helpful to know some common mistakes you need to avoid when you’re off house hunting.

Not getting pre-approved before shopping for homes

As a first-time homebuyer, you want to start looking at houses right away. The housing market is on fire right now, with 3.6 months’ worth of inventory instead of the normal six-month supply. With such a hot seller’s market, you could lose out to other buyers if you go shopping without getting preapproved for a mortgage.

  • Why avoid this mistake?
  • Obtaining a pre-approval from a lender means you know exactly how much you can spend on a house. You won’t waste time looking at homes you can’t afford. Unless you’re paying cash, sellers are unlikely to consider your offer if you aren’t pre-approved by a lender.

  • How to do it right?
  • Gather all the information you need to secure a pre-approval. Check your credit score to make sure you qualify in the first place. The pre-approval letter from the mortgage company tells you the amount you can borrow based on your financial history. By identifying how much you can afford, a preapproval allows you to focus on homes within your price range. With this document on hand, sellers will perceive you as financially fit to buy their property.

Not comparing mortgage rates

Getting a mortgage is a key step in buying your home. Some home buyers tend to limit themselves to a quote from one lender only to realize later on that they may have made a costly mistake.

  • Why avoid this mistake?
  • When you get a single quote and speak to only one lender, you could end up with a higher interest rate. Mortgage rates differ from lender to lender, including closing costs, discount points, and other fixed fees.

  • How to do it right?
  • Go shopping. The Consumer Financial Protection Bureau (CFPB) said that home borrowers could save $300 per year on average by comparing rates from just three lenders. By comparing rates, you can clearly see the best deal for you. Check also for customer feedback and reviews.

Making a small down payment

There are mortgage programs that require only a very small or zero down payment. First- time homebuyers may opt for a smaller down payment thinking it will save them money.

  • Why avoid this mistake?
  • A small down payment means higher monthly payments. The less you put down upfront means you’ll need to borrow more and pay higher interest. Making a down payment of less than the standard 20% will mean topping off your monthly payments with the cost of a private mortgage insurance (PMI), which insures the lender in case you default on your loan.

  • How to do it right?
  • One of the most important home buying tips is to save up for the 20% down payment to avoid paying the PMI. The higher your down payment, the less you will need to borrow. You lower your interest rate and build up your equity faster. In the end, you could save thousands of dollars.

Missing out on VA, USDA, and FHA loans

First-time homebuyers might find it a challenge to produce the 20% down payment needed to buy a home. That, however, is not the end of your homeownership dream. There are options outside conventional loans.

  • Why avoid this mistake?
  • Not looking into borrowing options could shut you out of buying your first home. VA loans, USDA loans, and FHA loans are government loan programs that offer low or zero down payment, lower credit score requirements, closing costs rolled into the loan amount, and no mortgage insurance.

  • How to do it right ?
  • Learn more about these government-backed mortgages and compare them with conventional loans. Weigh the pros and cons of each. While there are huge perks to government loans, they come with sweeping conditions such as withholding your wages, legally taking funds from your bank account, and seizing your tax refund to pay back the debt you owe.

Skipping home inspection

Home inspection is meant to identify any potential issues with the property you’re planning to buy. To cut down on expenses, some buyers waive home inspection.

  • Why avoid this mistake?
  • Skipping home inspection can be a costly mistake. Being unaware of the possible issues of the house, such as structural damage, can cost you thousands of dollars down the line. To forego a home inspection means you assume all the financial risks for accepting the condition of the house as is.

  • How to do it right?
  • Home inspection is meant to protect your financial interest in one of the major purchases in your life. As such, you can build in a home inspection contingency in your home purchase contract, giving you time to have the property professionally inspected. The results of the inspection give the buyer the right to walk out of the deal or negotiate repairs.

Want to know more about first time home buyer guide to properties in Williamsburg, VA and other nearby communities? Contact Coldwell Banker Traditions, one of the most trusted brands in real estate in Williamsburg, VA. Call 757.229.9595, email info(at)cbtraditions(dotted)com, or drop us a message here.