Buying a home is a process that is naturally confusing for the first-timer. A common bewilderment is about how much home can be purchased for the amount of money being loaned. If you’ve ever watched Home & Garden Television’s “Property Virgins” you’ve seen this on display.
The show’s real estate agent shows homebuyers around a neighborhood and, at then she asks them what they think the homes there would sell for. They always guess way too low.
Assuming a particular neighborhood is in your price range is one of the most common mistakes first-time buyers make. Let’s take a look at other common mistakes and let you know how to avoid making them.
Not Preparing for the Purchase
“By failing to prepare, you are preparing to fail,” or so said Benjamin Franklin. If you wouldn’t go car shopping without knowing what you can afford you shouldn’t shop for a home without that knowledge either. Failing to prepare your finances and seeing a lender about a mortgage will do nothing but set you up to lose out on the home of your dreams.
Besides, if you shop for homes in a price range higher than you can afford those that you’ll eventually see within your price range will pale in comparison.
Spending too much
When you’re pre-approved for a loan you’ll be given a figure ― this represents the most amount of money you can borrow. Many first-time buyers take this figure and run with it, looking only at homes at the top of their price range.
What happens is that they leave themselves no room in their budgets for emergencies. A major home repair bill may prove untenable when the bulk of your paycheck goes to the mortgage.
Determine a monthly payment that you feel comfortable with, that allows you to put money aside every month for maintenance and emergency situations. Let your lender know you want to remain close to that figure and he or she can give you an idea of the maximum home price you should aim for.
Falling in Love
Some houses are alluring, there’s no doubt about that. It’s easy to fall in love with the curve of a staircase, smooth walls donning sophisticated colors and lines that would shame Adonis.
Actor Keanu Reeves puts it into perspective though by reminding us that “Falling in love and having a relationship are two different things.” A house is something with which you’ll have a long-term relationship so it’s important to look beyond the enticing glamour to determine if it truly serves your lifestyle now and in the future.
Look beyond the bling to the bones of the house, the floor plan and the flow. Picture your belongings in place of the designer’s carefully-chosen items. Falling in love is fun, but it’s the relationship that is ultimately more satisfying.
Poor Timing
There are three types of real estate markets: buyer’s markets, seller’s markets and balanced markets. Buying a home in a buyer’s market vs. in a seller’s market is completely different.
A buyer’s market, for instance, is leisurely, allowing the homebuyer all the time he needs to view homes, determine a fair offer and haggle with the homeowner. Try that in a seller’s market, though, and that same homebuyer will be shut out of contention on every house he attempts to bid on.
A seller’s market on the other hand is one in which there are few homes for sale and many buyers wanting to purchase. It’s the seller’s turn to be demanding, to hold firm to the asking price, to refuse to allow any buyer concessions and to demand adherence to his or her terms.
Avoid losing the house of your dreams by understanding the current market and what you can and can’t get away with. Speak with — and listen to — your real estate agent.
