You don’t know what you don’t know. And as a first-time homebuyer, there is a lot you don’t know. While licensed professionals, like your real estate agent and your mortgage planning specialist, will guide you through the process, you want to understand the key components, benefits, and risks of buying a property.

Here are five common mistakes that first-time home buyers often make!

Shopping for a Home Before You Have Mortgage Approval

As long as housing inventory remains historically low, you can expect to compete with dozens of other offers for each home. How do you make sure your offer is considered? The bare minimum is to have your mortgage approval before you even start your home search. Not only does this keep you agile when a suitable home comes on the market, but it also gives you a better position to negotiate. And with the Leo Anzoleaga Group, qualified buyers have fully underwritten loans (rather than just an approval letter) to bring to the negotiating table.

Thinking of a Quick Flip

When you sell your home, you should expect to set the price for at least 8% to 10% more than what you paid for it to break even. In other words, to recoup the costs of the home plus commissions, transfer taxes, closing costs, etc., you will need to sell your home for at least 8% to 10% more than the purchase price. If your property appreciates 3% on average per year, then you would likely break even in about two to three years. That is why my team recommends a long-term strategy when buying your home.

Underestimating the Costs of Home Improvements, Maintenance, and Utilities

The price of the property is not the only cost you need to consider when buying a home. As a buyer, you need to consider your ongoing expenses. There are a few ways to get an estimate so you are prepared.

1. Order a comprehensive home inspection before closing to get an idea of the repairs you will need to make. Keep in mind that sellers may agree to some repairs before closing, but if the market is especially competitive, they may not be incentivized to make many concessions.
2. Research how much utilities will cost each month. Figure out which utilities apply to the home, which companies service them, and their average rates for a property like the one you are considering.
3. Save money in your monthly budget for annual home expenses. One rule of thumb is 1% to 2% of the home’s value. It’s also a good idea to have an emergency fund for major unexpected home repairs.

Choosing the Wrong Down Payment Strategy

There are many variables to home affordability: mortgage payment, mortgage interest, insurance, down payment… But one study by the Federal Reserve reported that your down payment strategy is eight times more impactful on home affordability than the mortgage interest rate. What this tells us is that your down payment strategy is critical to your home-buying strategy.

Focusing More on the Mortgage and Less on the Mortgage Professional

You have hundreds of choices when it comes to choosing a mortgage lender. While some folks care only about the monthly payment, most home buyers are searching for a mortgage advisor to help them manage this debt even after they close. If you fall into the latter category, keep these four questions in mind as you interview mortgage professionals.

What’s Next?

Your mortgage is likely going to be your largest debt, and that means you want to be as prepared as possible before you start putting in offers. If you still have a million questions about how to buy a home in this real estate market, reach out to my team for a free consultation at Leo@Anzoleaga.com.