Buying your first home is exciting. Many young people view homeownership as the definitive mark of adulthood, the final milestone on a decades-long journey. And while becoming a homeowner is cause for celebration, you’ll want to ensure you keep your enthusiasm in check just a little while longer.
Keep a level head and you’ll easily avoid these common mistakes first-time buyers make.
Don’t View Your Home As An Investment
First-time buyers commonly think that they can invest everything they’ve saved into a home, fix it up, and then sell it for a large profit in a few years. However, a home is a fixed asset that can be hard to sell off quickly. Economics professor Art Carden says “for people looking to start an investment, a stock or bond is a better option than a house, as I’ve never had to call a plumber because a mutual fund started leaking.”
Don’t Skip The Home Inspection
The American Society of Home Inspectors says 10 percent of home purchases happen without an inspection. Quite simply, buyers decide it’s better to save the fee for the down payment – but often, issues arise later that can result in multi-thousand-dollar repair bills. Foundation problems can be especially nasty, sometimes requiring a teardown.
Before signing a contract, make sure you have a licensed home inspector view the property.
Don’t Believe Everything You Read On The Internet
While it’s good to start researching neighborhoods, mortgage terms, and home valuations online, keep in mind that online estimates are just that – estimates. Not all mortgages are created equal, and the many differences between loans can result in significant changes in the overall cost. For example, just because a lender is giving you a mortgage without an origination fee, that doesn’t make it a good deal – you could be paying a lot more in interest rates.
Always make sure you thoroughly check and understand loan terms before signing anything.
Don’t Go For The Most Expensive House You Can Afford
When you qualify for a mortgage, your lender will tell you the maximum home purchase price they’ll fund, based on your annual income as well as your debt-to-income ratio. However, just because you can afford a $500,000 two-story townhouse, that doesn’t necessarily make it a good idea to buy said townhouse. You’ll want to give yourself a cushion in the event that you lose your job, have children, need to pay medical expenses, or go back to school.
First-time buyers often make a variety of mistakes when buying a home, but a mortgage advisor can help you to make the right decisions – decisions that set you on the best possible path toward homeownership. Contact your local mortgage professional today to learn more.
Last week’s economic reports included Existing and New Home Sales and Consumer Confidence along with regularly scheduled weekly reports on mortgage rates and new jobless claims.