Hiring An Agent Willy-Nilly
As a first-time home buyer, you will be relying on your real estate agent more than anything during the process of buying your first home. And unless you somehow know a ton about home-buying, you’re probably going into this process blindly. Don’t do that. Now, do you legally have to have a real estate agent? No. But like we said, if this is your first time...don’t be stupid, get an agent.
But don’t just get any agent. Spend real time asking tough questions to multiple agents and make an informed decision about which ones stand out for what you are looking for. Not all agents are the same and, unfortunately, not all of them have your best interest at heart. So take the time and get to know one that you can trust, because you will rely heavily on this person during your first-time buying process. Trust us.
Not Getting Pre-Approved
First off - there’s a difference between being pre-approved for a mortgage and being pre-qualified. You need to know the difference as a first-time home buyer to avoid a big punch in the gut when you finally find your dream-home. Pre-approved means just that, you’re approved. Ready to go. It is as good as a promise, based on your official financials that has been analyzed by a lending agency. Pre-qualified, is more or less just a handshake ‘You’re good!’ deal. It isn’t promised and is not official. There’s a real chance that you can show up the day you need to get your mortgage loan and the bankers hit you with a big surprise - you’re not approved. And no approval means no house. So do yourself a favor and make sure you are pre-approved, not just pre-qualified.
Avoiding Dual Agency?
Avoid it! Well, what is it? Dual agency is when you, as a first-time home buyer, go to the home you want to purchase and enlisting that real estate agent (the one who is selling the house) to be your real estate agent as a buyer. That means the one real estate agent is representing you as the buyer and then representing the homeowner as well. Conflict of interest, much? Not only is it a poor idea, it’s illegal in some states. The agent will not be loyal to you, or to the owner for that matter, and that likely means you aren’t going to get a fair shake. Do yourself a favor and get a real estate agent dedicated to representing you in the buying process.
Trusting The Internet
Putting too much stock in the online evaluation of a property can hurt you, big time. Utilizing a website like Zillow or Trulia to determine what kind of offer you should make is setting yourself up for failure as a first time home buyer. These websites compile an 'estimate' based on an algorithm that takes into account size, location, age, etc. and pumps out a (usually) pretty sound number.
However, it is completely common for the estimate online to be something like $400,000 and the property really isn’t worth a dime over $350,000. So you come in and offer the 400k number, and the homeowner licks his chops and you look like a dummy. Not to mention, you are also out of $50,000.
This is where rule #1 comes into play. A real, qualified real estate agent won’t let that happen. Save yourself the loss and only use online estimations to get you in the ballpark, not to the final price. It’s a common mistake for first-time homebuyers.
Not Thinking About The Little Things
What do we mean by that? We mean the monthly trash bill, the utilities that need to be paid every month, the HVAC system you wanted to upgrade but now are faced with the reality of how much that upgrade will cost. These little things that are now your responsibility as a first time home buyer add up after you’ve purchased your home. If you don’t factor them into the overall cost, or at least your financials moving forward, you will be in over your head. Buying a home and maxing out your budget to get it without factoring in all the additional costs is a one-way ticket to a headache and financial stress. Factor them in!
Changing Your Financials Before It’s Official
Hey first time home buyer! You’re not in the clear yet! Unless it’s signed and done, your pre-approved mortgage could come crashing down if you aren't careful about your financial decisions during this time. Sometimes, people will make major, and maybe even unrelated, financial decisions in the weeks leading up to their homeownership. But buyer beware: if you purchase a car the week before you’re set to sign your official papers - that can throw up a red flag at the bank! Because this will trigger a change in your financial status, the bank could easily deny your pre-approved status. This means you’re back at square one and have to watch your dream house slip away. Plan on waiting until after the homebuying process is finalized before making any decisions that impact your financials.