If you’ve never owned a property before, then the thought of buying a home can be incredibly exciting. However, the process itself is not always straightforward. In fact, it can be pretty complex, and most first-time buyers are not as well prepared for this substantial financial transaction as they should be.
If you’re planning on buying a home, then be sure to avoid these common mistakes.
Not setting a realistic budget
Figuring out how much you can borrow is one thing. What you also need to calculate is how much you should borrow. You need to work out how much you can comfortably afford to spend on your mortgage every month, so you still have enough left over to enjoy the kind of lifestyle you want.
Of course, this differs for everyone. You may not spend a great deal of money if you’re the type who enjoys spending time at home, aside from the odd dinner out here and there. If, on the other hand, you’re used to traveling abroad every year and going out for dinner and drinks on a regular basis, then you need to take these things into account.
Use a borrowing power calculator to work out how much you could borrow based on your income, and then consider your lifestyle and the extra expenses that come with homeownership to help you determine a more realistic monthly budget. Taking this step early on will help you avoid the temptation of buying a home that is way out of your price range.
Not taking into account the full costs of buying a home
Those extra expenses that we mentioned before? They’re costs that many homeowners fail to budget for, so be sure that you don’t make that same mistake.
Do your research and find out about things such as homeowners insurance, appraisal and home inspection costs, moving costs, property taxes, and the cost of any necessary repairs you’ll need to make on your new home.
This may sound like a lot, but it’s not an exhaustive list, so doing your research and finding out what costs will apply to you is an important part of the process as they are added expenses you will need to budget for.
Not getting pre-approved for a mortgage
Once you have worked out a budget, you need to find out whether or not you will realistically be able to purchase a home in this price range. You can do this by getting pre-approved for a mortgage.
This is different from a pre-qualification, which is a useful estimate, but not as valuable as a pre-approval, which carries much more weight. You will need to undergo an extensive financial background check and supply a lot more paperwork, but it’s worth it for finding out the specific mortgage amount for which you would be approved.
It will also come in handy when you want to make an offer on a home, particularly if that seller receives multiple offers. Being prepared could mean the difference between securing that home and losing out.
Not doing your research
Most people don’t know how to price a property properly when they first start looking for a home to buy. That’s why you need to do your research and figure out a way to work out the value of a property you’re interested in, particularly if you are thinking of attending auctions.
You need to become good at spotting a bargain, which means you need to have a good understanding of how much properties typically go for in the area you’re interested in. One way to do so is to ask your agent for a comparative market analysis.
If you’ve found a home you like, then you can also get a property value report to find out a price estimate for the house, how much it’s sold for in the past, its rental history, along with other relevant real estate information.
Doing this type of research is crucial if you want to avoid overpaying for a property. Your offer should be based on a combination of things, including your research findings, and not just the seller’s asking price.
Buying a money pit
If you can’t quite afford your dream property yet, or you’ve been watching too many home makeover shows, then you may be tempted to purchase a rundown home that you can do up yourself for less.
While this DIY fantasy may work out for some, the reality is that most people don’t have the skills, time, or budget to undertake such a mammoth task. There are some things you won’t be able to do yourself, such as electrical wiring, and those things need to be properly budgeted for.
If you’re determined to go down this route, then be sure you find out the full extent of work that needs to be completed by getting a property inspection done. Once you know this, you can get some quotes from different contractors to figure out how much this project will cost you all in all.
Taking these steps may seem like a lot of effort, but they can make a big difference. There is a lot more to buying a property than the things we have mentioned above, so take your time, do your research, and avoid making beginner mistakes that could end up costing you a fortune.