Six “First-Time” Homebuyer Mistakes That Can Cost You Extra Money

In Buyers by Doug Phelps

Have you ever sat back and watched someone you care about do something that is detrimental to their goals in life?

Time and time again, real estate professionals have often watched first-time buyers struggle with their home buying experience. Although this post is mostly directed at the first-time home buyer, anyone buying a home will find these tips helpful.

Tip #1  Don’t guess at what you can afford

Many beginner home buyers spend hours online researching homes, falling in love with something outside their budget. One of the first things all buyers must do who are using financing to purchase their home is to apply to a qualified lender and get pre-approved for a mortgage.

It is unwise to guess at how much you can afford. You must know your limit and comfort zone – these aren’t necessarily the same thing – in a purchase price and monthly housing cost.

Tip #2  Don’t fail to budget for taxes and other homeownership expenses

There is no getting around property taxes, so they must be budgeted into your financial equation. The amount of annual property taxes can be easily discovered.

There are other expenses buyers need to consider. Homeowner association dues, property insurance, exterior maintenance (i.e., lawn care and painting), and higher energy bills. Depending on the loan program, there could also by costs for mortgage insurance.

Tip #3  Have realistic negotiation expectations

The Denver metro market is a strong seller’s market and offers below the list price will eliminate you from consideration. Your offer should be reasonable, and if a bidding war breaks out, have other homes in mind to make it easier to walk away if the price point soars beyond your comfort zone.

Tip #4  Don’t skip a professional inspection

This can be tempting in a really strong market where there are many buyers for fewer inventory of homes. Everything may look wonderful at the initial showing, but what’s happening behind those walls, in the plumbing lines and heating ducts, or on top of the roof? Not knowing can cause you to buy a home with substantial problems and major financial headaches.

Tip #5  Exhausting all of your funds

Spending all of your savings on the down payment is one of the biggest mistakes first-time home buyers make. You will want to buy furniture for your home and add your own personal touch, but if you are living on the financial edge because you used every dollar on the down payment, it takes a lot of fun out of life.

Tip #6  Curtail pre-closing purchases

In this tight lending environment lenders will pull credit reports just prior to closing to make sure the borrower’s financial situation has not changed since the loan was approved.

Therefore, it is vitally important to not go out before you have closed and have the keys in your hand to make any large purchases that will require the use of your credit. Why? Because any new loans on your credit report could jeopardize the closing.

Like most things in life, buying or selling a home is difficult to master unless it’s something you do all the time. A real estate professional by your side will guide you past the pitfalls, educate you on the market, inform you on your options, and help you get the best possible home for the best possible price.

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