When the purchase is well planned, the act of buying a first home is a solid financial investment capable of adding wealth and stability to the life of any size household. Unlike some other types of investments that have volatile up and down trends, real estate has proven to be more likely to experience gentler cycles and gradually increase in value over several years of ownership. But because the purchase of real estate is nearly always a major expenditure, making a mistake can be very costly, especially for first-time home buyers who are working with limited funds and resources. If you are a first-time home buyer, avoiding these costly mistakes can help ensure that you reap enjoyment and continued financial benefits from the home you purchase, instead of feeling saddled with an expensive mistake.
First Mistake: Stretching your budget too thin to make the home purchase
First-time home buyers, especially those who may be tired of handing out rent money to their landlord each month, often make the mistake of stretching their budgets too thin in order to make the purchase. In many cases, these buyers believe they will be able to rebuild their savings afterward, based on expected raises at work, reducing other expenses, or additional earnings from some type of temporary job. But doing this can be dangerous and leave new home owners struggling to furnish the home, buy necessary appliances, or meet one-time costs and fees, such as utility deposits if the extra money never materializes or the unexpected expenses were even larger than they thought. To avoid having a home ownership dream turn into a financial nightmare filled with hardships, first-time home buyers should consider waiting to purchase their home until they have enough savings to comfortably afford all the extra costs they may incur during the first few months of ownership, as well as extra savings for unexpected home repairs or other costs.
Second Mistake: Choosing a home you cannot afford to live in
Much like buying a home before you are financially ready to do so, buying a home that you cannot afford to live in is another costly mistake first-time home buyers should avoid. These homes can have affordable purchase prices and monthly mortgage payments yet have recurring costs that become difficult to manage, such as high utility bills, HOA fees, or property taxes, major renovation or repair issues, location issues that make commuting to work or school too expensive, or other issues that continue to eat away at the monthly budget. To avoid buying a home that you cannot afford to live in, buyers should always take time to find out all the costs that they can expect to have when actually living in the home before signing the purchase agreement.
Third Mistake: Failing to take advantage of industry pros
A third mistake commonly made by first-time buyers in the excitement of buying their first home is to fail to take advantage of the knowledge offered to them by industry real estate professionals. Buyers who are in a hurry to get an offer accepted on a home often make mistakes they later regret, such as:
- failing to discuss the mortgage process with a lender and get approved for the loan before signing a purchase agreement
- failing to find a good agent and utilize their skills selecting the home, or negotiating the price and terms, and working through the entire sale process
- failing to insist on a home inspection contingency or pay attention to the home inspector's report regarding the condition of the home
- failing to get advice and a firm repair bid from a reputable repair contractor when addressing issues found in the home inspection report before agreeing to move forward with the purchase
Buying a home can be exciting, but buyers who slow down and consider all aspects of both home buying and ownership will be better positioned to make a decision they will not regret later.