"Today, it's just a house - Tomorrow, it is home."
Buying a home is always an anxiety-ridden process, and that goes triple for anyone who’s embarking on homeownership for the very first time. There’s so much to do, and so much you don’t know that “overwhelming” hardly seems like an appropriate description of how it feels.
Even though you don’t want to scare yourself away from the entire process, you still need to be wary of falling into a few common traps that first-time buyers generally don’t avoid. If you’re aware of these five potential mistakes -- and able to keep yourself from making them -- then you’ll be saving yourself some significant stress on your homebuying journey.
1. Not understanding your down payment options
The biggest headache for so many first-time buyers is the down payment. If you’ve ever bought a car, then you’re probably familiar with the concept -- it’s money that you contribute to the total cost of the purchase.
A down payment of just a couple of thousand dollars can get you a head start on your car. However, if you don’t have a certain amount to put down on your home loan, you might find yourself paying private mortgage insurance (PMI).
PMI could cost between 0.5 and 1 percent of the total loan amount depending on your credit score, the bank, and other factors.
Most banks require at least a 20 percent down payment before waiving the need for PMI on loan. And most homes in this area cost about $300,000, so that means a buyer would need to bring $60,000 to the table to avoid PMI.
Some government organizations and lenders incentivize first-time homeownership by offering free down payment grants or loans to qualified buyers. Depending on your age, income level, credit score, and other factors, you could qualify for free money to wrap into your down payment.
2. Not getting prequalified for a loan
Between the amount of money you plan to put down on the home, the potential PMI, and other cost factors, your monthly cost could be significantly more (or possibly less) than some of those calculators will show you online.
So before you trust those “estimated monthly mortgage loan amount” numbers that you see popping up next to your potential new dream home on Zillow or a brokerage website, it pays to figure out what you can actually afford -- and that means getting prequalified for a home loan.
You will need to talk to a mortgage loan officer and submit a slew of documentation, from your monthly pay stub to your credit score, for that loan officer to tell you how much money you can get for your home loan. It’s a little bit painful, but the prequalification letter you’ll get as a result is much more credible than a quick qualification you can pull up on an app -- and that means sellers will take it more seriously when it comes time to put in an offer.
3. Not finding a qualified real estate agent
It’s so easy to find homes online these days that you may wonder why a real estate agent is even necessary. After all, isn’t the hard part -- finding the place you want to buy -- something you can do yourself?
Well, maybe. But in areas with red-hot markets, you’re probably not seeing the most updated listings -- that home you just fell in love with online might be under contract before you can set up a time to tour it.
Not only can an agent make sure you have access to listings the second they hit the MLS, but a qualified agent should also provide expertise in the area where you want to move. Whether that’s feedback on who can help you with homeowners’ insurance quotes to warnings about some of the frequent pitfalls of owning a home in that neighborhood, in particular, a qualified agent is an invaluable resource.
4. Not spending the night in the neighborhood
If it’s at all possible, see if you can find an Airbnb or another vacation-rental type of setup where you can crash for a night or two -- preferably closer to a week -- so you can try your new neighborhood on for size.
Is an 8 a.m. arrival time at work still reasonable with this neighborhood’s commute?
Where are the closest grocery stores, parks, rec centers, and hiking trails?
What are the overnight noise levels? If there’s a train that rolls through town in the early hours of the morning, you’re near a highway or a flight path -- and any of that is going to disturb you -- then it’s best to figure it out before you’re spending your first night in your new home and wake up to unpleasant (and unexpected) noises.
At the very least, you can learn enough about the neighborhood to know how close to (or far away from) the bus line you need or want to be and target your home search accordingly.
5. Not understanding what’s fixable and what’s a deal-breaker
Those drop panels in the ceiling are hideous, and you can’t imagine how anyone can fit into that minuscule bathtub. Are those annoyances that can be fixed or deal-breakers that mean you should pass on the property entirely?
This is another area where a good real estate agent can help. They see so many houses in various stages of repair and updating that they can show you where you can claim another foot or two for bathtub space (and help you figure out how much it will cost and who’s trustworthy enough to take on the job) or let you know that the ceilings are too low for any changes to make much of a difference.
None of these mistakes will keep you from buying a home of your own -- but they could delay the process and cost you hundreds (if not thousands) of dollars at the end of the day. But if you’re able to avoid them, you’ll be signing the closing papers on your dream home before you know it!
Ellis Realty Group - Waterfront and Canal Home Specialist