First time homebuyer mistakes

According to a new report released by the National Association of Realtors, First-time buyers make up 35 percent of all home buyers in 2017. Our team loves helping first-time buyers achieve their dreams of homeownership. In fact, it's one of our specialties! Each client is different but the excitement and joy of closing on the first home is the same for each. We work alongside our clients as they navigate the market and process of buying a home. Without guidance, navigating the complexities of homebuying can often lead to mistakes—but that's where we come in.

Here what you need to know in order to avoid the most common mistakes new home buyers make.

1. Be Fully Prepared for Home Ownership

Getting ReadyAs you start making preparations to buy a new home, there are several important steps you will need to make. First, prepare your documents. Typically you're going to need copies of your past two years of tax returns, two or three months of your recent bank statements, account information related to any stocks you may own etc. Organizing your required documents will allow you to move through the first and final stages of the homebuying process with less friction. Next you will need to find a good real estate agent to work with. They are your partner and advocate. Ask questions and interact with them so you are comfortable when you both commit to the relationship.yehs

Your agent can help with the next task of finding the right lender to get (pre)approved for a mortgage less stressful. Again, interview more than one lender. This is a large investment and you want to choose the right fit for you. Once you are preapproved your agent will work on your behalf to find a home that is the right fit for you and your budget.

With over 50-years of combined experience, My NC Homes has seen a few mistakes along the way. We like to share some best practices we share with clients. These will also help you avoid some common first-time home buyer mistakes.

Mistakes That Can Affect Your Loan

First time home buyers have made the mistake of assuming the pre-approval letter from the lender a guarantee for a loan. You will want to track your credit score and take precautions to prevent and major fluctuations.

Your credit score has a tremendous impact on your home loan. We encourage our clients not to touch their credit cards while they are in escrow. We have seen clients make the mistake of opening new credit cards during escrow. The Gap credit card may be tempting to get the first discount, but you will regret opening that card. Opening new credit accounts negatively impact on your credit score. Running up the balance on your existing credit lines will also bring your credit score down.

My NC Homes cautions their clients who may be job searching during escrow. Don't make the mistake of changing jobs before you close. This can lead your lender denying your loan.

Leave Your Emotions at the Door

We advise our clients to focus on their needs as opposed to their wants. This approach works in your favor for a few reasons. First, this is your first home. It is unlikely that you will find your dream home. Secondly, it's important to understand that statistically, there is a 93% likelihood that you will only live in it between 5-7 years.

Focus instead on areas that will make your life easier. Consider proximity to work, friends and the places you like to spend time. Subjective items like countertops, paint, floor coverings, etc. can be changed to your liking as money allows. Because we have extensive experience on our team with construction, we are able to work with our clients to help them identify the “big ticket” items. HVAC, roof, siding, and foundation can be stressful money drains if you are not prepared.

When you narrow the focus to needs, you are less likely to buy with your emotions. It is easy to fall in love with a home. If that home does not have what you need, you will be miserable after the first year. Emotional decisions are some of the most damaging mistakes that a new home buyer can make. It can haunt them if they overpay for a home they fell in love with and fails to fulfill any needs.

Online Tools are not Always your Friend

There is a convenience and ease to using online tools to research homes in the area. Zillow and Trulia are the biggest offenders that incorrectly estimate home values. We also see inaccurate results with online mortgage estimate tools.

Too much faith placed in these tools leaves users misinformed. The results are unfortunate for many sellers and buyers. The data is not accurate and expectations are often crushed. Working with an experienced realtor that will research and analyze the market data and give you valuable market insights will give you an edge to find the right home faster in the local market.

Understand the Monthly Costs of Owning a Home

Some homebuyers have made the mistake of maxing out the home mortgage limit. This is especially a problem if they have not considered the basic monthly expenses involved with owning the home. The industry standards recommend that a mortgage to stay below 30% of your income.

2. Appreciate the Value of the Home

Appreciate your HomeA common misconception of many first-time homebuyers is in regards to appreciation of a home's value. It's a mistake to enter into the process assuming the home will drastically appreciate in 3 or 4 years. While anything is possible, we encourage homebuyers not to make a purchase decision based on this assumption.

Historically, the Triangle Area has appreciated at roughly 5% a year. Between 2014 - 2017 the Triangle has seen appreciation of 20+/- particularly for properties priced below $325,000. You don’t have to look back any further than 2009 - 2011 to understand markets fluctuate.

Depending on when you buy and when you need to sell, a home may not see appreciation in the value. This does not mean buying a home isn’t a good financial decision. On the contrary, there are many reasons homeownership is a sound financial step for many people.

In our other article about Buying versus Renting, we share a spreadsheet showing the costs over a 4-year period of renting a home versus buying a similar home. You will find data that shows a home appreciating over time, not appreciating over time and even depreciating in value over time. In every instance, it still cost less to buy than to rent. If you are considering living in the same area for 3+ years, this is quantifiable evidence that shows the financial advantage of purchasing a home compared to renting.

Note: The numbers have changed slightly since the article was initially published. For example; interest rates are lower and rents have increased. Please note that no tax benefits were considered when running the numbers.

3. Just Remember, Slow and Steady Wins the Race

According to a report from National Association of Realtors, buyers on average spend 10 weeks searching for a home walk through 10 homes before buying. Buyers between the ages 37-51 searched for closer to 12 weeks. From start to finish, the homebuying process can take months for the average buyer. As time passes and frustrations rise, it is easy to rush through making hasty decisions, but this leaves you open to making damaging mistakes. You can mitigate these mistakes with a prepared mindset and a qualified realtor by your side.

Co-authored by 3 Bossy Bees

Posted by Larry Tollen on

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