Avoid These Common First-Time Home Buyer Mistakes

Making your first home purchase is one of the most significant decisions you’ll ever face, so it’s important to take the time to prepare. There are many potential pitfalls and mistakes that can be made as first-time home buyers in Miami navigate the complexities of the process. To help you have the best possible experience, we’ve compiled a list of common first-time buyer mistakes.

Many first-time buyers realize too late that the homebuying process actually begins well in advance of looking for your new home. There are many things you should do to prepare financially for buying a home, and failing to do so will almost certainly result in problems.

 

To get a mortgage, you will have to supply the lender with documentation that shows that you can re-pay the loan. Typical loan applications require that you provide copies of recent tax returns, pay stubs (or other proof of income), and bank statements. In addition, the mortgage lender will also look at your credit history and current credit score. So, before applying for a mortgage or pre-approval letter, make sure that you have gathered copies of the necessary documents and that you’ve taken the time to review your credit history. If you uncover any errors on your credit report, be sure to contact the credit bureau to have those corrected before you apply for the loan. The more organized you are, the less likely it will be that you’ll encounter issues.

 

Before you contact a real estate agent and begin to search for homes for sale in Coral Gables, it is strongly recommended that you get a mortgage pre-approval letter from your lender. Many first-time buyers make the mistake of getting pre-qualified but not pre-approved, which is very different. A pre-qualification only indicates that the lender has looked at your financial documentation and believes that you will qualify for a loan. In contrast, a pre-approval is a conditional guarantee from the bank that you will be approved for a mortgage up to a certain determined maximum amount. Your loan will be locked in and ready to go if nothing significant changes with your financial or credit situation prior to closing. A pre-approval offers several advantages, but the most important to first-time buyers is providing a targeted price point for the home. Knowing in advance how much of a loan you will be able to get is critical to directing your home shopping efforts.

Another common mistake first-time buyers make, and one that can end up costing them thousands of dollars over the term of the mortgage, is not shopping around for the best loan. Mortgage lenders differ significantly; they may have vastly different mortgage rates and loan processing fees. In addition, as a first-time buyer, special programs are available just for you.

 

Likewise, special loan programs are also available through the VA, USDA, and FHA. A good rule of thumb is to get a quote from three to five different lenders before making a final selection.

Although a bank will pre-approve you for a specific mortgage amount, other costs are involved in purchasing a home. In most cases, you’ll be expected to contribute 20% cash to the purchase as a downpayment. If you cannot put 20% down, you may still be able to make a purchase, but you’ll be required to pay Private Mortgage Insurance (PMI). In addition, you will need additional cash for closing costs, attorney’s fees, insurance, taxes, and a home inspection. Since it is difficult to determine precisely how much money you’ll need ahead of time, it’s good to try to save at least 25% of the sale price to cover the downpayment and other fees.

Once you have your finances in order and your loan pre-approval in hand, it’s time to begin your home search. This is another part of the process where first-time buyers can be tripped up.

The mortgage pre-approval is conditional; that is, the ultimate obligation of the bank to provide you with a home loan is contingent upon your financial status remaining consistent until after the close of the sale. Many first-time buyers make the mistake of applying for new credit or incurring additional credit card debt before they close on the home. The information you provided the lender regarding your income and debts must not change significantly before the final loan approval is granted. If major changes do occur, it’s entirely possible that the loan will be denied.

When you begin looking at Coconut Grove homes for sale, remember this is where you’ll be living for at least several years. Be honest about problems and issues with the house, and don’t sugar-coat them. As you walk through the house, if you find yourself pointing out many things that will need to be repaired or updated, consider that a red flag. While you may undoubtedly be able to handle those projects and build “sweat equity,” it’s important to take stock of the amount of time and money those projects will require. In the meantime, you’ll have to live with those issues. Many first-time buyers have set the bar too low and purchased a home that ended up being a “money pit.”

Many first-time buyers get “tunnel vision” when they begin looking for a home — looking exclusively at the house while not paying close enough attention to the neighborhood. As you drive to a home showing, look carefully at the surrounding area. Is it appealing? Does it have a lot to offer in terms of your desired lifestyle? Is it clean, welcoming, and well-kept? Is the area quiet or noisy? Is it conveniently located near work or school? Is the area up-and-coming, or is it in decline? Failure to carefully assess the pros and cons of the neighborhood can be a huge mistake.

Purchasing your first home is an emotional and exciting experience, so it’s always helpful to enlist the help of someone that can temper your emotions. Many new buyers make the mistake of getting too emotionally attached to a home they want to purchase, leading them to make too high an offer for fear of being out-bid by another buyer. With the expert assistance of a seasoned real estate agent, you’ll be provided with valuable insight for making a fair and reasonable offer, reducing the likelihood of making a costly emotional decision.

After the seller has accepted your offer, you are nearly finished with the home purchase. There are still a few things that need to happen, including an appraisal, a home inspection, and your final loan approval.

 

A professional home inspection is typically done before closing on the home purchase. The purpose of the inspection is to ensure that the house is in good condition and that there are no hidden problems or issues. Many first-time buyers make the mistake of waiving the home inspection, either to sweeten their offer or because they don’t think it’s necessary. This can be a costly mistake. If there are issues with the house's electrical, plumbing, or structural components, it’s critical to know about those things before being locked in with the purchase. If the inspector uncovers a significant issue, you can back out of the deal or force the seller to renegotiate.

 

As a first-time buyer, it’s best to get the help of a real estate professional. An agent with a track record of success and experience with new buyers will be able to provide you with the guidance and help you’ll need, ensuring that you avoid making costly mistakes. The Jennifer Price Luxury Real Estate Group understands the complexities of buying your first home, offering expert assistance for every step of the journey.

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