Five Common Mistakes First-Time Home Buyers Make

Without question, first-time home buyers can be eager to jump into home ownership...and it's understandable!  It's a very exciting time when you finally decide which direction your life is going, your career is taking off in the right direction, and you decide to plant roots.  However, real estate experts say they see many first-time home buyers committing the same mistakes time and time again.  This is also understandable!  Unless you've gone through the home buying process, not only can it be intimidating, it can be a real mystery.  Here are some of the most common mistakes first-time buyers make, as identified by experts in a recent CNBC article:

1. They’re unprepared to compete against all-cash offers.  

Buyers need to be ready to make a quick decision if their housing market is heating up.....A housing market can turn on a dime, and when there are more shoppers than homes to be shopped, quick decisions are a must!  Buying a home is “really like finding a job – it’s going to take a lot of time to prepare,” says Cara Pierce, a certified housing counselor with ClearPoint Credit Counseling Solutions. “That way, when the deal comes along, you’re ready to pounce on it.” Housing experts say buyers should prepare well in advance of their search, and have already saved as much money as possible for a down payment.  Before they shop, they should repair any credit report blemishes, and have already gained pre-approval for a loan.  Your realtor can help you with these important steps....They know the best game plan as they begin your house-hunting journey, and they will help to place you in the best position to compete with other shoppers!

2. They place a car ahead of the home. 

Lenders are going to scrutinize applicants’ debt-to-income ratio when assessing how well they can afford a potential mortgage payment. Consumer debt has gone on average from $40,000 in 2010 to around $51,000 today, according to David Norris, president and COO of loanDepot, a non-bank mortgage lender. "It would be much easier to own a home if you can show a history of saving and not have gotten yourself into too much debt," Norris told CNBC.  As mentioned earlier, moving from renter to owner takes time and preparation.  The best way to be prepared is to keep your debt ratio to a minimum -- at the same time, you want to establishing good credit by paying all bills on time -- and getting approved for a loan will be a much easier process for you.

3. They place too much emphasis on online loan information.  

Online sites can be good for general information about loan products and estimated costs, but experts recommend visiting with mortgage lenders face-to-face.  This will help to demystify some of the process and to take into account your specific situation.  Your realtor has relationships with many lenders, so rely on them for some great advice and referrals!  It is best to go to different places and talk to loan officers to get a feel for all types of loans -- there are several options out there!  Pierce says, "Sometimes a company won't charge an origination fee, but then the interest rate is higher … and in some cases you can put many of the upfront costs—closing costs, title insurance—into the loan, which makes your balance larger."  The best advice is be a savvy shopper...and a savvy student.  It can be time consuming to research on your own, but having this knowledge is necessary!  This is a BIG purchase, so you want to educate yourself as much as you can.  Learn about the different types of loans that are out there, and which loan would work best for you and your family! 

4. They rely too much on online home values. 

Some real estate websites are giving buyers a false sense of home values, the CNBC article notes. "If a buyer believes that the actual value of the property is $1.1 million [as listed online] when it's really $1.3 million, it's a real disservice to the client,” says John Barrentine, co-founder and CEO of RED Real Estate Group. “You really should [spend time] with someone that understands the market, someone who's there day in and day out." Home buyers can get the best feel of the market by working with a real estate agent they know and trust.  Home buyers should also drive around a variety of neighborhoods to get a sense about homes that may be less valuable or even more valuable than what they originally perceived by viewing them online.

5. They forgo the home inspection. 

About 10 percent of homes recently purchased weren’t inspected by a home inspector, according to Bill Loden, president of the American Society of Home Inspectors. Some buyers were trying to cut down on the costs of hiring an inspector to investigate a home, which usually averages about $450, but defects uncovered later could potentially result in the loss of thousands of dollars. "It takes a trained eye to be able to see the problems that can exist in a home," Loden said. "The inspection can also give the first-time buyer a bit of a schooling on the house and how to maintain it." Buyers should also be prepared to ask questions about conditions that are common to their specific areas.  Issues include radon gas in Midwest, sewers in California, and active clay soils in Dallas that can lead to foundation issues, the CNBC article notes. The home may require additional inspection from a specialist to rule out potential problems.

Some information included here is from the source: “8 Biggest Mistakes First-Time Homebuyers Make,” CNBC (July 17, 2014)