So, you’re buying your first house. Congratulations! If you’re anything like the majority of first-time home buyers, the emotions you’re feeling are likely to be all over the board.

The overwhelming excitement of owning a home that you can call your own is sure to be coupled with feelings of anxiety and stress. In fact, a study conducted by Homes.com in 2018 found that 40% of first-time home buyers call their buying experience the most stressful event of their lives.

The question begs to be asked: what can be done to minimize the stress and maximize the excitement? Well, a good place to start is by understanding the most common mistakes first-time buyers make so as not to fall victim to them. In this article, we outline some of those mistakes and give you helpful tips to avoid them in your own house hunt.

Not Knowing How Much House to Buy

One of the first mistakes first-time home buyers make is entering the market without knowing how much house they can afford. Without nailing down your price range, you might end up wasting your time looking at houses you can’t afford or walking through homes that are below your price point, and thus not the size or quality you need.

The easiest way to decide how much house you should buy would be to calculate a monthly payment that will necessitate implementing a budget, but that won’t keep you up at night. It’s also a good idea to pick a monthly payment that you could comfortably make for up to three months without any income as a way of being prepared should disaster strike or...  ahem, a global pandemic :)

A mortgage calculator, like this one, is a good resource to use to calculate your future monthly payment based on down payment amount, loan size, and interest rates. Another strategy used by many first-time buyers is to buy a starter home first as a way of getting their “home ownership” feet wet. Although this option may not be best for you.

Not Putting Enough Money Down

Houses are expensive, but sometimes we forget just how expensive they really are because the payments are broken up into manageable monthly amounts. It’s possible that your home will never feel as expensive as it does as the day you put down the money for the down payment. Especially when you consider that this amount is several times larger than what your future monthly payment will be.

Because homes require a hefty sum up front in the form of a down payment, first-time buyers are often tempted to put a smaller amount down as a way to “save money”. Make no mistake, a small down payment may feel like you’re saving money now, but it could end up costing you thousands of dollars further down the road. There’s a few reasons for this:

1. Putting down less money often results in a higher interest rate.
2. The less money you put down, the more you have to borrow from your lender, which means more interest paid over the course of your loan.
3. A down payment of anything less than 20% of the purchase price will require you to get additional mortgage insurance, which means one more monthly payment you’ll have to make.

Ideally, you’ll have given yourself ample time to save at least 20% of your future home’s purchase price for a down payment before you begin your search.

Finding a Home Before Applying for a Mortgage

Before we get into this too much, let’s talk about the difference between being “preapproved” and being “prequalified”. While they sound similar, they mean very different things, and can sometimes be the difference between getting your dream house and missing out on the chance.

Prequalification: Prequalifications give you an idea or estimate of what you are able to borrow. It’s also an opportunity to learn more about different mortgage options and to work with your lender to find the best fit for your situation.

Preapproval: Preapproval takes prequalification to the next level by having your lender approve you for a loan of a specific amount that is good for a specified amount of time (usually 90 days). Being preapproved means you can search for a house with confidence, knowing that the loan amount you will need can be secured quickly once you find “the one”.

Eager buyers will sometimes make the mistake of looking at homes without first getting preapproved from their lender. This can be an especially big mistake in hot markets where homes in the best neighborhoods receive multiple offers within days of listing on the market. In a competitive market, it’s not unlikely for your offer to be rejected if you aren’t preapproved first. Preapproval sends the message to the seller that you are seriously interested and are able to secure the loan needed to close quickly.

Talking to a Single Lender

For a first-time buyer, going straight to your personal bank and asking for a mortgage might seem like the easiest, cheapest, and fastest way to get approved for a loan.

This isn’t necessarily wrong, but by not taking the time to peak to more than one lender you could be leaving money on the table. In fact, according to Freddie Mac, limiting your mortgage options to a single lender could cost you as much as $3,000. Because mortgage rates are highly personalized, applying to multiple lenders will result in quotes with different rates and fees from each of them. Taking the time to go through this process the right way guarantees you get the lowest rate possible.

Underestimating the Costs

It’s important to understand that there are more costs associated with owning a home than just the down payment and your monthly mortgage payment. As a first-time buyer, these costs can sneak up on you and might even put you in a less-than-favorable financial situation. Check out this article about the most common home buying costs first-time buyers often forget.

Skipping the Home Inspection

Because a home inspection is an added expense for the buyer, first-time buyers often view it as unnecessary or a waste of money. After all, you’ve walked through the house, checked it out, and everything seems to be in order.

A professional home inspector does a lot more than kick a few baseboards and test the water pressure in the master bathroom. On average, a home inspection report is 66 pages long and can identify problems that could cost you an arm and a leg down the road had they gone unnoticed. Having the home properly inspected before closing the deal allows you to negotiate a lower asking price or have repairs made based on the home’s true condition. 

In some markets, the seller will have already completed the home inspection before listing the property and will make it available. In these cases, it is important to check the credentials of the inspector along with asking the seller if anything has been changed from the original report before deciding to waive your inspection contingency. Feel free to reach out to the Inspectify team for a free review and repair estimate of any seller provided inspections, we can also help you book any additional inspections as well!

Conclusion

First-time home buying is a stressful process no matter what. But doing your research and covering all your bases will make it easier to focus on the excitement and not the anxiety. Avoiding the above mistakes will give you a head start on the process, meaning you’re well on your way to being a homeowner.