According to the
dictionary, a mistake is an error resulting from deficient knowledge or
carelessness. While we can't do anything about carelessness, when it comes to
counseling first-time homebuyers, the real estate agent is a tremendous
resource to help overcome knowledge deficiency.
That homebuyers lack
knowledge about the process only makes sense when you understand that shopping
for a home may be a once-in-a-lifetime experience for some. Certainly, it's not
something most Americans do frequently. The process is foreign and the pitfalls
are hidden. This is why it's so important to find the right real estate agent
to assist you along the way.
Let's take a look at some
of the most common first-time homebuyer mistakes.
Mistake 1: Not Being Clear About Money
Going into a home
purchase with your eyes closed to your finances is probably one of the biggest
mistakes you can make during the process. Nobody likes unpleasant surprises,
yet that's what you open yourself up to when you are ignorant about where you
stand financially.
If you are unsure about
your credit-worthiness, order your credit reports from the three major credit
bureaus. By law, Americans are entitled to one free report from each bureau
every 12 months. You can order your free reports at AnnualCreditReport.com, the
only authorized website, according to the Federal Trade Commission.
Look for errors on the
reports and dispute any erroneous information. Pay off what you can to help
lower your debt-to-income ratio.
Then, see a lender to
determine exactly how much you can borrow for a home.
Finally, when you have
that figure, don't be tempted to shop for homes priced at the limit. Give your
post-purchase budget some monthly wiggle room by purchasing at the middle of
the price range, or a bit more.
Mistake 2: Not Being Clear About Your Wants and Needs
While you may not get
everything on a wish list, it's a good idea to compile one – especially if more
than one person will be living in the home.
Understand that your wish
list isn't set in stone and you can plan on it changing once you start viewing
homes. During the home-shopping process, you will get a better idea of which
items are feasible with your budget and which will have to be struck from the
list. Knowing what you want and need in a home is vital to your long-term
satisfaction, so it's worth the time it takes to sit down and make a list.
Don't neglect the
neighborhood wish list either. Do you need to be close to public
transportation? If you'd like a family neighborhood with lots of kids for yours
to play with, put that on the list.
The bonus to getting clear
on your wants and needs is that when you share the list with your real estate
agent, your time won't be wasted by viewing homes that don't fit your criteria.
Mistake 3: Not Reading the HOA Documents
If the home you decide to
make an offer on is managed by a homeowners association, you'll be presented
with a stack of paperwork to read over and approve. These are the HOA documents
and, although terribly boring, they hold a wealth of valuable information that
you must be privy to before making the final decision to purchase the property.
These documents govern
how you can use your home, and they give you an idea of how much and how often
your fees might rise. You'll learn about common and ongoing problems the
association deals with and how financially solvent the association is.
Don't be like the couple
that purchased a condo without reading the HOA documents and found out, three
days after closing, that they - along with all the other homeowners - were
being assessed $7,500 to remedy construction defects.
If you don't feel that
you can read and understand the information in these documents, it's important
to hire an attorney to help you wade through them.
Mistake 4: Making Big Changes
The best part of the
home-purchase process is that point during the transaction when inspections are
complete, all the contingencies have been removed, and it feels like smooth
sailing to the close.
Unfortunately, this is a
danger zone for rookie homebuyers. This is typically when they start picturing
themselves actually living in the home and the urge may be overwhelming to shop
for furniture, appliances and other big-ticket items.
Just before closing, many
lenders perform what is known as a "soft pull" of your credit
reports. It's called "soft" because it doesn't impact your score in
any way. It's the lender's way of making sure all the circumstances under which
it approved the loan haven't changed.
Any big changes you make,
such as large purchases or getting a new job, may derail or delay the purchase.
If the new debt you've taken on is substantial enough, it may change your
debt-to-income ratio and you may be forced to reapply for the mortgage.
Keep your pocketbook
closed and remain on your current job until you walk away from the closing
table.
Mistake 5: Waiving the Home Inspection
Although foregoing a home
inspection was unthinkable a few years ago, in a seller's market where multiple
offers are common, it's tempting to agree to waive the home inspection as an
incentive for the seller to pick your offer. It's also not very wise.
A professional
inspection, even of a newly constructed home, may be the only way you'll know
whether you're buying a lemon or a plum - a money pit or a smart investment.
When you forego a
professional home inspection, you're essentially buying the home "as
is." Without the inspection contingency, the buyer waives his right to ask
for repairs or money to make the repairs.
Waiving the home
inspection is never worth the risk.
Knowing how much home you
can afford is paramount to a successful home purchase. Making the decision to
remain within a certain budget, doing all you can to clean up your credit to
get the lowest interest rate possible, and becoming clear on your desires and
expectations all help to make the home-buying process as error-free as possible.
Your Local Real Estate Expert,
Stephen Nissou
Nissou Realty Group | Keller Williams Realty
Direct 619-250-4541 | Office 619-873-2772
Stephen@StephenNissou.com
www.StephenNissou.com
CALBRE # 01443193
