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Avoid the Mistakes that
Other First-time Homebuyers Have
Made
It
happens every day. First-time homebuyers, partly due to enthusiasm, partly
due to ignorance, make costly mistakes during the home buying process.
Take Jonathan for instance. Jonathan hasn’t slept in days. Like a
freshly caught fish, he flips around all night then wakes drenched and
exhausted. As with many first-time homebuyers, Jonathan got hooked: He
bought more house than he could reasonably afford.
To
help you keep your sanity and your cash, become an educated consumer and
avoid the mistakes that others have made before you.
Mistake
#1: Not planning ahead. From the moment you think about buying a home,
start planning. Home buying is a time-consuming and demanding process, and
it behooves you to utilize your management skills early on.
Start
by requesting a copy of your credit report. Carefully examine it for
errors, and clean it up before you talk to a lender.
Are
you currently renting? Check your lease for an early release clause. If
you’ll be subject to penalties, try to time your closing with the
expiration of the lease.
During
this planning phase, consider your life over the next five to seven years.
Do you plan to start a family? Will an in-law eventually move in with you?
Will you be working from home? The number and layout of the rooms you
require will depend on your answers.
If
you qualify for financing based on a dual income, will you be able to
survive on one salary in order to fulfill a long-range plan, such as one
parent staying home to raise a child? Once you’ve answered these
questions, establish a plan. Then direct the process with reference to the
plan. Don’t let the process dictate to you.
Mistake
#2: Failing to understand the home buying process. First-time
homebuyers need to ask questions. Lots of questions. So choose a real
estate agent who has experience working with the uninitiated and is
willing to explain the entire home buying process—from viewing homes to
negotiating, to financing, to escrow and closing—in detail, and explain
it again until you understand it.
Mistake
#3: Getting in too deep. It
can happen when homebuyers shop outside their budgets or over-extend
themselves. What can you do to avoid getting hooked? Monitor your expenses
for a couple of months. Then, based on your findings, develop a budget
that truly reflects your lifestyle. Talk to a real estate agent who can
provide insight into new home expenses and taxes. Then revise your budget.
It’s
smart to ask your lender to pre-approve, rather than pre-qualify, you for
a mortgage. Pre-qualification only tells how much you can afford.
Pre-approval goes a step further. Your lender will thoroughly evaluate
your application—including verifying employment information and
financial disposition—then clear you for a loan of a determined amount.
Having your loan pre-approved gives you a sizeable advantage: Your new
status as a cash buyer makes you more attractive to the seller.
Once
you learn how much of a home you can afford, stay within your budget. Just
because you’ve been approved for a certain amount, doesn’t mean
you’ll feel comfortable with monthly payments at the high end of the
range. Ask yourself if you can live with these payments. Do they fit your
established budget? If not, rethink your spending limit. Your new home
should give you great pleasure, not hold you hostage.
When
you relay your price range to a real estate agent, ask to view properties
within that range only. By restricting yourself, you’ll avoid
disappointment later on.
Mistake
#4: Being ruled by the heart and not the head. Curb appeal can be a
powerful force. It’s the first-time buyer’s kryptonite. By disengaging
the mental faculties, it leaves the homebuyer emotionally vulnerable. To
counter its effect, you must be objective. Brutally objective.
Look
at many homes, including an assortment of types of homes. When you view a
property, list the positives and the negatives. Take along a tape measure
and record the measurements of all the rooms. Make certain your furniture
will comfortably fit into the space. Visit at various times of day to see
how much natural light floods the rooms and check for changes in traffic
patterns, especially at local rush hours. Have an inspector or engineer
pick apart the property. And recruit a friend to view the home and provide
you with objective feedback. Ask if he or she can picture your family
living there and discuss the whys and why nots. Jot down the points for
later review.
Also,
think about how long you plan to own the house. Would it be difficult to
resell? List the negatives. Could you eliminate or reduce them?
Mistake
#5: Buying into an unknown location. Don’t stop your inspection at the
property line. Examine the surrounding area. Is it safe, well maintained
and moderately quiet? Is it convenient to work, schools and shops? Ask
about zoning and that lovely forest of vacant land across the street.
Could the highway nearby be widened in a couple of years? How far is the
train? Within ear shot? If you’re not familiar with the area, ask
friends and colleagues about it. Do your research.
Learn
from the mistakes of others. It’s the best way to ensure a first-time
homebuyer a good night’s sleep.
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