11 Most Common Mistakes First-Time Home Buyers Make (BEFORE, DURING, and AFTER) and how to Avoid The

11 Most Common Mistakes First-Time Home Buyers Make (BEFORE, DURING, and AFTER) and how to Avoid Them

Buying a home is overwhelming especially for first-time buyers. It's one of the biggest purchases most people will make in their lives. The home buying process is not comparable to other financial transactions. Because of your unfamiliarity as a first-time buyer, you'll often sabotage your home searches by making easily avoidable mistakes along the way.

In most cases, you make mistakes BEFORE, DURING and AFTER buying a home. Avoid them today, and you will be well on your way to a smooth home-buying experience. Picture this scenario: You make about $50,000 per year, have one kid, and your wife is a stay at home mom. You currently rent a two bedroom apartment and want to buy a home.

Mistakes BEFORE you buy a home

You decide you have had enough renting. You're ready to buy a house, with a big backyard, three bedrooms, and two bathrooms. I bet the first thing you’ll do is to call your bank and ask how much you can borrow.

Your banker will ask how much you make, car repayment, and if you have good credit. You say you earn $50,000, have a $350 car repayment, and good credit. Perfect. Your banker says you can afford a $250,000 home. So you start looking at homes online worth $200k-$250k

You make several mistakes here.

1. You don’t go through a full pre-qualification with your banker.

Overlooking other payments such as school loans or credit card payments, or even running credit check will set you up for potential disappointment down the road.

It’s a big mistake not to allow your banker to check your credit rating ahead of time for fear that the inquiry will pull down your score.

You need to disclose everything so the lender can give you an accurate answer. It's better to find out upfront if there are any issues, so you have ample time to deal with them.

2. Fail to look at homes based on your personal budget

Like most people, you want to buy the most expensive house you can. You figure, "if the bank says I can borrow this much, then I must be able to afford it."

Just because you can borrow up to a certain amount doesn’t mean you should.

It is not a bank's job to do a personal financial analysis for you. Even though they should, their primary objective is to make a sale as large as possible without caring much about your future financial burden.

3. Fail to figure in the extra cost of a house

Owning a house is not just about replacing rent. You need to keep in mind rent may cover expenses such as water/sewer, garbage, and other maintenance issues.

Expenses often associated with owning a home are; purchase of furniture, small home improvements, property taxes, maintenance costs, and utilities. — which you can easily overlook when securing a mortgage.

All these costs keep increasing every year, and when clubbed together, they often add up to an overwhelming amount. When buying a home, make sure you ask the developer or current owners about utility costs and the price you’ll have to pay for annual maintenance. Homeowners spend 2%-4% of the home value on regular maintenance.

4. Fail to save enough money

Most buyers don't save up enough money before house shopping. In most cases, a minimum you need is 3.5% down payment.

Therefore, it becomes difficult for you after buying the house when a significant expense comes up.

Savings will help you meet the loan costs involved in buying a house. Such costs include; loan fees, appraisal fees, mortgage insurance, home insurance, property taxes and much more.

Mistakes DURING buying a house

The chances are high that you will seek the services of a real estate agent to help you look at a couple of homes within the $240,000-$250,000 range. But, as you move around, you see another house on sale across the road worth $300,000. Despite the price difference, you insist on seeing it anyway, "Just for fun." Here are some of the mistakes you make while buying a house.

5. Start at the top of your price range.

The problem with looking at the more expensive homes first is that you will almost always compare with the cheaper ones. And you'll most certainly get sucked into buying more than you need.

The best way to shop is to start from the cheapest ones and work your way up.

6. Look at homes more expensive than you can afford.

Almost similar to the previous mistake, but in this case, you want to a house you can't afford. You will "settle" for a cheaper home yet in your mind, you want bigger and better.

Avoid shopping based on wants and not needs.

The chances are that in 5-7 years your needs will change and will want to move. And this is true whether you buy a $180,000 house or a $300,000 house.

7. Fail to think about maintenance

Building and maintaining a house varies based on a degree of quality. Some homes need more upkeep and repair costs than others.

Always look at both the upside and downside when looking at a home.

Mistakes AFTER buying a home

Now, you’ve found a house of your dreams.

Let's say it ends up costing $260,000. (Your parents gifted you with additional $10,000). It is an older house with deferred maintenance but of great "character."

Immediately after the transaction, you decide you want to redo the kitchen because it looks ugly and put the $10,000 renovation onto your credit card.

You figure out, the possibility of refinancing the home after a couple of years and pay off the credit cards and your parent’s gift.

Here are some of the financial mistakes you make after buying a home.

8. Pay more than you can afford.

From our example, you could only afford $250,000 from the bank. But you ended up buying a house worth $260,000 because you thought $10,000 wasn't a big deal.

A piece of solid financial advice is to never borrow more than 25% of the take-home pay on your mortgage repayment. It is likely that the new mortgage payment is going to be difficult to pay.

9. Make immediate changes to the home

There is nothing wrong with renovating your house.

But think about how your renovations will affect your resale value.

Here's the thing, if all the houses in your neighborhood have similar kitchens, putting a brand new won't necessarily raise the price that much.

Also, buying furniture and making changes you don’t have money for is a financial mistake. It only increases your financial obligations.

You should wait for at least six months to get used to the new monthly expenses.

10.Fail to save for significant repair costs

Older homes tend to come with some repair needs.

Avoid spending all the money you have without thinking about having an emergency fund for the roof when it starts leaking or the old furnace dies.

11.Refinance or take a home equity line of credit.

Almost every time, homeowners borrow more money against their house, kicking the can down further the road. You’ll spend more money regarding refinance costs and repaying more in interest over the life of the loan.

When you do this, you are not getting ahead financially over your home.

Many times you see homeowners heading into foreclosure after 10-15 years. Sadly they have no equity in the house because they have been refinancing and refinancing. Before going into foreclosure, which can have ramifications on your credit for years to come, it is recommended to contact a reputable cash home buyer to see if they would be willing to buy your home.

Make your experience smooth

It's exciting to buy your first home, at the same time full of complexities. While you're busy dreaming of your kids and dogs playing in the yard or imagining the perfect decor, do not overlook some critical financial aspects of home ownership. Some of these mistakes could end up turning your dream into a disaster.

Earl White is Vice-President at House Heroes LLC. House Heroes LLC is a real estate investment company based in Florida, with offices in Sunny Isles Beach. The company specializes in purchasing residential property.