Buying your first home is a thrilling experience, but it’s also full of potential pitfalls. From overlooked repairs to emotional overbidding, the number of first-time home buyer mistakes that can cost you thousands is surprisingly high.
To ensure that you avoid the financial bumps on the road, let’s cover the 10 most common first-time home buyer mistakes, as well as the ways to overcome every one of them.
1. True Cost of Ownership Omitted
Too many first-timers only think of the mortgage and the down-payment. The price of a house goes much beyond that.
What You’re Missing:
- Homeowner’s insurance
- Property taxes
- The costs of maintenance and repair costs
- Condo / Co-Op fees
- Utility bills for gas, water, hydro, internet, etc (which are usually more than renting)
What to Do Instead:
Ask the seller to provide a copy of the last year’s utility bills in a clause in your offer to purchase. From those documents you can create an emergency fund that is 1-2% of the value of the home to be used in maintenance from time to time in a year.
2. Turning a blind eye to the future of the Neighbourhood
Most of the time, a beautiful house located in a less desirable or depreciating neighbourhood does not increase in value. Your quality of life can be lowered, and the value of your home with it, by noise, crime, traffic, or impending zoning changes.
What You’re Missing:
- Construction or infrastructure projects
- School district quality
- Neighbourhood crime patterns
- Future business plans
What to Do Instead:
Go see the property at various times of the day and talk to neighbours. Find maps of city planning and crime statistics, or even as simple as looking up WalkScore. It is not just the house that you research, but rather the whole block.
3. Trading Worth For Cosmetics
A new coat of paint and staged homes may make you forget that there are issues in the structure or other elements to the home. A house, which looks good, may not be a good place to live.
What You’re Missing:
- Interior water damage
- Old roof-HVAC systems
- Foundation cracks
- Old plumbing or wiring
What to Do Instead:
Look deeper. Hire a home inspector and make sure you include a Home Inspection condition in your offer. Things you can do during your initial viewing are; Check all the faucets, flush toilets, open windows and look at the screens to see if there are tears, test the lights, check cabinets to see if there is mold or possibly even leaks. Nevertheless, it is always best to employ a reputable inspector who can give you an in-depth report of what needs to be addressed before possession.
4. Letting Emotions Influence Your Purchase
When it comes to purchasing a home, it is an extremely emotional process but letting your heart rule can lead you to making the wrong decision in the wrong home at the wrong price.
What Could Happen:
- Overbidding in a bidding war
- Settling on deal-killers (commute, layout, etc.)
- Lack of attention to inspection red flags
What to Do Instead:
Before house hunting, create a list of things that you have to have, things you would like to have and things that will break your deal. Adhere to them. Visit at least 3 homes before offering on one.
5. Failure to be Pre-Approved
Too many buyers who are buying their first home believe that they will be given the loan that they want or they underestimate how much they can actually purchase for.
What You’re Missing:
- Knowing what you can really spend
- Learning about credit problems at the later stage
- Losing out to those who got pre-approval home financing
What to Do Instead:
Don’t just get a pre-qualification but a mortgage pre-approval. It bolsters your offer, and you have a chance to shop according to your actual budget, without the potential for disappointment later down the line.
6. Not Budgeting Correctly For Closing Day
It’s not only upfront costs like down payments you have to look out for when buying a home. It’s also the outgoing costs which might build quickly and in the event that you have not set aside money to pay it, you might not close on time.
What You’re Missing:
- The fees charged when a loan is being originated
- Title insurance
- Appraisal fees
- Written agreement and lawyer expenses
What to Do Instead:
You should pay between 2-5 % of the home package in the form of closing costs. Get a Loan Estimate at the beginning of the process and include it in your overall plan buying a house.
7. Overlooking the Importance of A Home Inspection
When there is strong competition in the market, one is tempted to forfeit the inspection. Our advice? Don’t. Also, do not just read the report, show up for your inspection. The inspector will provide you on-site knowledge and debriefs before your final report is sent to you.
What You’re Missing:
- To view the problem areas onsite
- Repeated inquiry to the inspector
- To comprehend the difference between severity and cosmetic defects
What to Do Instead:
Never miss the inspection. Make it a learning exercise. Request to know what needs immediate repair, what is not so important, and what may turn into a future cost to look out for.
8. Ignoring the Resale Value
The initial place that you live may not be the place that you stay forever. When you purchase a house that is difficult to sell, it will be difficult to upgrade in future.
What You’re Missing:
- Strange designs or services
- Unattractive curb appeal
- Less desirable school districts
- Unpopular home styles
What to Do Instead:
Be your own investor. Ask yourself, whether in 5-10 years, this will be something desirable to another buyer. Talk to your real estate agent to discuss trends in the marketplace prior to putting in an offer.
9. Knowing Your Budget
You can always borrow but just because a bank will lend it does not mean you have to take the maximum amount.
What You’re Missing:
- Money in the budget to repair, upgrade, and life events
- Flexibility in future (changes of job, enlargement of family)
- Hidden costs (e.g., higher property taxes or insurance on more expensive homes)
What to Do Instead:
Apply the 28/36 rule: do not expend more than 28% of gross income on a house and 36% on overall debt. It really is a matter of buying the house you need, rather than buying the house which is going to leave you house poor.
10. Failure to Plan for the First Year
Even a so-called “move-in ready” house usually requires adjustments: furniture, blinds, appliances, landscaping.
What You’re Missing:
- Unforeseen repairs (repaired appliances, touch up)
- Immediate improvement (new security systems, fencing)
- Empty-room syndrome- furnishing into existence
What to Do Instead:
It will help you to put aside a minimum of $3,000 – $7,000 dollars to cover the first year of home ownership cost. Make a move-in budget prior to closing.
Final Thoughts: Learn to Buy Smart
Preventing these first-time home buyer errors does not require good fortune, it requires studying, carefulness, and organization. Go from house to house with a checklist, ask questions, look at what is beyond the initial first impression. Owning a home should not be a financial strain or one that has any regrets.
The most amazing thing with being educated and careful with your finances is that it is free. Anything you do not make an error on is money you do not lose, stress you did not have to deal with in the future and equity established right in the beginning of owning your home.
And here is a reference guide when you are a first-time buyer on the hunt. Take a look prior to each property viewing or even just in your spare time to keep yourself accountable. Your future self will love you.
