With so much to think about, it’s not surprising that some first-time home buyers make mistakes they later regret. Here are a few of the most common pitfalls, along with tips to help you avoid a similar fate.
Shopping For A House Before Speaking With A Mortgage Lender
What the bank says you can afford and what you know you can afford are not necessarily the same. Additionally, what you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income. Getting pre-qualified helps you understand how much home you can afford and shows the sellers and real estate agents that you’re a serious shopper. Get pre-qualified for a loan before placing an offer on a home and before you go house-hunting. If you don’t, you’ll be wasting the seller’s time, the seller’s agent’s time, and your agent’s time. Imagine signing a purchase agreement only to discover later that the bank won’t lend you the amount you need.
Speaking With Only One Lender
Shopping for a mortgage is like shopping for a car or any other expensive item, and it pays to compare. Mortgage interest rates vary from lender to lender and so do fees such as closing costs. Getting a mortgage requires some work on your part as you will need to take time out of your day to have a conversation with a loan expert and provide them with some documentation. It’s this kind of required commitment that leads people to work with the first lender they find but choosing convenience may cost you thousands of dollars in the long run. When you don’t shop around, you could miss out on a better deal. No two lenders are the same and each one may offer different interest rates, closing costs, or other fixed fees. By speaking with multiple lenders, you’ll be able to choose the one that will save you the most money at the closing table or over the life of the loan.
Not Budgeting For Closing Costs
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage. Closing costs vary so shop around and compare prices for certain closing expenses, such as homeowners insurance, appraisal costs, title searches and attorney fees. Calculate your expected closing costs to help you set your budget.
Draining Your Savings
Hidden and unexpected costs can come up with homeownership. Previously owned homes can, inevitably, need unexpected repairs. Maybe you’ll need to replace a water heater or pay a homeowner’s insurance deductible after bad weather. Don’t exhaust all your funds buying a home.
Not Saving Enough For Move-In Expenses
Once you’ve saved for your down payment and budgeted for closing costs, you should also set aside a buffer to pay for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint, and any improvements you may want to make after moving in.
Buying A Home For Today Instead Of Tomorrow
It’s easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home you’re considering will suit them.
Buying More House Than You Can Afford
Buying a home that’s outside a comfortable financial range is not a good idea. Savvy homebuyers understand the importance of buying a house that is less than they can afford. It may be tempting to max out the budget your lender gives you, but that would be a mistake. The way your life looks the day you sign on the dotted line is guaranteed to change at some point. Imagine if you’ve overextended yourself based on what you thought you could maintain with your income, but unexpectedly, that income went away. If you’ve bitten off more house than you can chew, you’ve left yourself vulnerable to outside forces and you’ve probably made yourself house poor. House poor means you spend a large portion of your income on homeownership expenses but aren’t able to meet other financial obligations or enjoy the little things. Don’t be house rich but cash poor.
Not Buying Adequate Homeowners Insurance
Before you close on your new house, your lender will require you to buy homeowner’s insurance. Shop around and compare insurance rates to find the best price. Look closely at what’s covered in the policies; going with a less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim. Also, we are in the hurricane belt so ensure that hurricane and flood insurance is covered by your homeowner’s insurance.
Waiting For The Perfect Property
Finding the perfect property is like finding a needle in a haystack. Looking for perfection can narrow your choices while prolonging your search, and you might pass over solid contenders in the hopes that something better will come along. This type of thinking can limit and sabotage your home search and lead to you overpaying for a home. Keep an open mind about what’s available on the market and be willing to put in some sweat equity. There’s no such thing as the perfect home, so be willing to make an imperfect home a perfect place to raise your family. You’ll never be able to do that if you keep looking and waiting for something that doesn’t exist.
Not Using a BREA Licensed Real Estate Agent
Once you’re seriously shopping for a home, don’t start your search without having agent representation. BREA Agents are licensed by the Bahamas Real Estate Association and are held to the ethical rule that they must act in both the seller and the buyer’s best interests. You can see how it might not put you in the best bargaining position if you start dealing with a seller directly or with a seller’s agent before getting your own agent. Additionally, working with an agent that is not licensed by BREA means they haven’t received the proper education and may not be familiar with the regulations and legislation governing sales nor have the skills to negotiate on your behalf. All agents are not created equal and being licensed by the Grand Bahama Port Authority is not the same as being a BREA licensed agent.