Lessons for First Time Home Buyers
Buying a new home is a complicated procedure. It takes patience, planning, and great timing. For a first time homebuyer, the process can be fraught with financial landmines.
Nothing beats the thrill of buying your first home. One of the biggest purchases you'll ever make, a new home offers you the chance to build equity, while creating a place for family memories. But you can wind up overspending on your mortgage and home repairs if you're not careful.
Lesson 1: Get pre-qualified before shopping
A cardinal sin of the first time homebuyer is to fall in love with a home that's too expensive. It's easy to walk into a home that's outside your price range, set your heart on buying it, and then do whatever you can to make it happen.
Even in this subprime mortgage crisis, some banks may still be willing to lend you more than you can afford, especially if you have good credit. To avoid this pitfall, get yourself pre-qualified before you go house shopping. Create a budget to determine exactly how much you can comfortably afford. Don't overextend yourself, since there's more to home costs than just a mortgage.
Lesson 2: Consider costs before you buy
When you find a home that you like, carefully consider all the potential expenditures-not just the mortgage. Take a look at the utility bills that the previous owner paid for the property. Ask your insurance agent how much it will cost to insure the dwelling. If there's a huge lawn and many gardens, think about all the potential landscaping costs you'll have. If there's a long driveway, consider the cost of snowplowing in the winter.
Plan future changes that you might want to make to the home, as well. If you want to add on a screen porch or a downstairs addition, it may be more cost effective to purchase a home that already has those amenities.
Lesson 3: Be realistic about do-it-yourself projects
Many first time homebuyers purchase a fixer-upper, with grandiose plans of performing an enormous makeover. That's fine, but make sure that you have the money and time to embark on such an undertaking. Most home improvement projects wind up costing twice what you initially budget for. Plus, if you're not experienced at this type of work, it will suck up hours of your time.
You may want to consider splitting up the tasks. Perform some of the manual labor yourself, then hire a professional for skilled jobs like plumbing, wiring, or floor refinishing. It'll be well worth the investment.
You want to love your new home, not feel trapped in it. Before you sign any mortgage documents, take a step back, and budget your money and your time. Be realistic about what you can afford as a first time homeowner to put into your house. The smarter you are before you close on a new home, the happier you'll be when the deed is done and the deed is yours.
Follow us on Twitter and Facebook.
Wave of Home Equity Defaults Coming?
How Refinancing Can Hurt Insurance Rates