Someone who has never bought a house may be lost in the world of real estate. There are so many things to learn in so little time, and some first-time home buyers make dire mistakes as they go along. Most people will not buy and sell more than a couple homes in their lives, so it is hard to master the market. But there are some mistakes for first-time home buyers to avoid to help make the process run smoothly.
Many first-time buyers assume they know what they can afford. They may base it off what they are paying in rent on another place, and assume that they can make that large of monthly mortgage payments. While they may be used to paying this amount, that does not mean a lender will think it is sufficient to provide a loan.
Buying power is important. A lender may look at the other debts that a person has and decide that they do not have enough income to sustain a high mortgage payment. Most lenders have a set debt to income ratio that they require a borrower be under to provide them a loan. The best thing to do is to get approved for a loan before looking at any houses.
The Wrong Lender
A lot of people want to buy houses. That means there is a huge demand for lenders to provide mortgages. This opens up the possibility for people to scam and cheat people out of their money.
If a lender is promising amazing rates with little information about the borrower, it is likely a scam. Be sure to research the lender before providing them with any personal information.
Getting Approved For the Wrong Thing
It is fantastic that first-time home buyers are going to get approved by a lender, but they need to be careful. There is a difference between getting pre-approved and pre-qualified.
A pre-qualification is a simple talk with a lender about the possibility of getting a loan. Getting pre-approved means the buyer has gone through the process of providing documentation to the lender to be approved for the loan.
Most pre-approvals are good for a couple months, but typically no longer than four months. A pre-approval will tell a seller that the buyer is able to provide payment. Sellers like to see buyers who are this prepared with their paperwork.
Pushing the Limits
Even after getting an amount from a lender, some first-time home buyers like to push their luck. They may look at houses at the top of their budget, or even over their budget, and hope they can haggle the price down. This is a dangerous game to play because many buyers fall in love with a house that they cannot afford.
It is a seller’s market. That means the seller has all of the power and buyers are flocking to try to get their offer accepted.
Making a low offer on a house that is priced reasonably is a great way to lose out on a house. Buyers should make strong offers if they hope to be noticed by a seller.
Letters to the Seller
Writing a personal letter to the seller can help a buyer stick out. However, providing the seller with a poorly written letter will make the buyer stick out for the wrong reasons.
Buyers should tell the seller what they love about the home or neighborhood. They should avoid telling them a sob story or begging them to choose them.
Changing Spending Habits
A buyer may get too excited when they get to the escrow stage in buying a house. They see the finish line in sight and start ordering new items for the house. This can completely change their debt to income ratio.
If the ratio is altered too much, the lender may decide to reject the loan, causing the whole deal to fall through. Avoid making any purchases until after the process is complete.
Too many first-time home buyers throw all their money into their down payment and do not have anything left for their closing costs. Closing costs can be as low as two percent and as high as seven percent of the price of the home. This is a huge difference and can cost the buyer thousands before closing can go through. Do not be caught without the money to finish the buy.
First-time home buyers often sabotage themselves. While they certainly do not mean to, there are many ways a buyer can ruin a sale. They need to be careful in the months leading up to the sale and know their exact buying power. Researching the process and doing your homework can help first-time home buyers navigate towards the right house and through the sale process without having any problems.