First time buying a home? Avoid these 4 pitfalls
Buying a home and taking out a mortgage is a complex process with major financial and emotional consequences.
All buyers are subject to certain critical mortgage mistakes, including the five biggest ones we recently highlighted.
But there are particular pitfalls you should maneuver around if this is your first time buying a home.
Avoid these mistakes, and you'll save yourself some heartache, if not time and money, too.
Mistake 1. Succumbing to false pressure.
First-time home buyers often set arbitrary deadlines for buying a home, like "before the wedding," "before the baby is born" and "before our lease expires."
But the excitement of meeting your goal will wear off quickly. Then you’ll be left with the day-to-day reality of living in a house that isn’t quite right because you rushed into your purchase.
Getting out of a lease early is less expensive than buying the wrong house. And trying to buy a home while pregnant or planning a wedding adds unneeded challenges to an already stressful time.
Mistake 2. Settling for a home that’s not right for you.
Besides arbitrary deadlines, there are other reasons why first-time buyers may settle for a home that isn’t right for them.
The desire to buy a home is so great, and the fear of failure is so high, that buyers will often buy a house that works instead of one that is truly right for them, says mortgage broker Todd Huettner of Huettner Capital in Denver, Colo.
"The results can be costly," he says.
You might think you’ve found the best option in your price range because everything you’ve seen so far is junk. Or you might feel rushed by the fear the real estate or mortgage markets will suddenly change and price you out.
If you can’t shake your impatience, there is a way to minimize the potential damage.
"The key is not to buy a house with a fatal flaw," says Michael F. Levy, principal broker of Grand Lux Realty in Armonk, N.Y.
Avoid any home that is next to a highway or railroad tracks, has road noise or is on a double yellow line street, is in a bad school district, or doesn’t have a flat, usable backyard, he says.
"If the house doesn’t have a fatal flaw, and the buyer hasn’t overpaid for it, they should be able to sell it again and find something better," he says.
How much house can you afford?
|Salary||Other monthly liabilities||Maximum monthly payment||Maximum mortgage|
|Above examples assume a 30-year, 3.53% mortgage rate and $1,200 in real estate taxes and $600 in homeowners insurance annually.|
Mistake 3. Being afraid to back out.
After investing countless hours shopping, then paying for a home inspection and putting down earnest money, first-time buyers may be afraid to walk away when they finally have a home under contract.
"People will overlook big problems if they think it is the only house for them," Huettner says.
Whether you don’t like something in the home inspection report, or you’re second-guessing how much you can afford to pay, if you have doubts, step back and reevaluate your purchase, says Erica Ramus, broker/owner of Ramus Realty Group in Schuylkill County, Pa.
"Backing out and losing your deposit — for any reason — can be cheaper and less traumatic in the end than buying the wrong house or buying a house that is wrong for any reason at all," she says.
If you see something on the inspection report that causes alarm, contact an expert to get the full scope of any problems, says Mike Canning, vice president of Delaware-based XONEX Relocation. A pro can help you decide which home inspection problems mean it’s time to walk away and which are minor fixes.
Homes are truly affordable in only about half of the nation's largest cities. Our 2012study found that buying a house is still a pricey proposition in many places, despite the big drop in prices and record-low mortgage rates. We grade the top 25 cities in our Fall 2012 Home Affordablity Study, and a couple of popular West Coast towns get slapped with an "F." Did your town pass the test?
Mistake 4. Trying to time the market.
It’s natural to question when it's the best time to buy after so many people have been seriously burned by the housing market over the last decade.
But with home prices still depressed and mortgage rates as low as they've ever been, waiting longer now makes little sense for most buyers.
"Unless you are an investor looking to quickly flip a home for profit, your timing should only be dependent on your own circumstances," Canning says. "If home value is dropping when you purchase, then you are getting a bargain from where it was. If the market is improving, you are getting it today at a bargain as compared to tomorrow."