If you are looking to buy a home for the first time, these tips will apply to you at any age. But, according to the National Association of Realtors, the millennial generation represents the largest share of those in the market to buy a home.
Even if you’ve been through the real estate drill before, it doesn’t hurt to review rookie home buying mistakes that you and everyone should avoid.
Mistake #1: Incorrectly estimating what you can afford
All too often, and not just with younger people, many buyers forget to include mortgage principal and interest, homeowners insurance, real estate taxes, and homeowner association fees (if applicable) when calculating their monthly payments. As a general rule, the total should not exceed 28% of your gross (pre-tax) income.
Mistake #2: Not getting pre-approved by a lender
A lender will tell you exactly how much you qualify for, which will keep you focused on homes in the appropriate price range. This will save you and your real estate agent loads of time. Be sure to have your W-2’s, bank and investment statements, as well as pay stubs handy to ensure a timely turn around with the lender.
One of the benefits of getting pre-approved is that you will have a competitive advantage in the housing market over any bidders who do not have a pre-approval.
Note: the amount your lender approves you for, is what you qualify for. Remember to factor in the components from mistake #1, as well as mistake #3 (below), to understand what you can actually afford.
Mistake #3: Being unaware of other associated costs
There are a few costs associated with purchasing a home that many buyers neglect to prepare for such as closing costs, as well as escrow, appraisal and inspection fees.
Mistake #4: Not using a professional
With the convenience of online real estate databases, many buyers are fooled into thinking they don’t need a real estate agent. And technically, they don’t. But the fact that the investment you are making will most likely be the largest investment in your lifetime, and you will be signing a 60 to 80 page legal contract to do so, is proof enough that you do need a professional.
Also, Realtors have proprietary access to every home that is currently “for sale”, “under contract” or has “sold”, within a multiple listing service; which is updated in real-time, as opposed to online databases that all too often have outdated information.
Mistake #5: Assuming you can afford your dream home
If you can truly afford your dream home, that is wonderful! But the truth is, many people can’t afford everything on their wish list. Discuss all “must-haves” and “deal breakers” with your real estate agent; and be realistic when they tell you what is available in your price range. Many wish list items are cosmetic and can always be added later on down the road.
Mistake #6: Letting your emotions take over
Buying a home, be it your first or last, is an emotional experience. Even the smoothest of deals come with a variety of intense feelings.
Letting your emotions get the best of you, puts you in danger of making a big decision with your heart instead of your brain. Keep a cool head and refer back to the must-haves and deal breakers as compared to what is actually available.
Purchasing a home is a big deal, especially if it’s your first time. Knowing what you can truly afford, using a real estate professional, being realistic, and keeping a cool head, will help you to avoid rookie home buying mistakes.
Looking to buy in the Central Valley? From the first handshake to the moment we hand you the keys to your home, San Joaquin Valley Homes is committed to making your experience a happy one. Contact us today to learn more about how we can assist you in the purchase of a beautiful new home.