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July 29, 2022

First-Time Home Buyer? Mistakes to Avoid


Derik Stephens

First-Time Home Buyer? Mistakes to Avoid

Buying a home could be a fun and exciting experience. It is a complex process but it doesn’t have to be a stressful one. It is essential to learn as much about the process as you possibly can before engaging in purchasing real estate. The more you know about the process and your options along the way, the easier the home buying process will become for you.  To help you, I will list a couple of key mistakes to avoid so you will have a pleasant home buying experience.

Failing to Stay on Top of Your Credit Activity

Your credit is your personal proof of your ability to repay any loan. Those metrics are held on three separate entities called “Credit Bureaus”.

As someone serious about buying a home, it is important to be familiar with all three of those entities.

Regularly check your credit reports with all three bureaus (TransUnion, Equifax, Experin), even if you are sure you have good credit.

Credit report errors are very common and if they lead to negative marks on your credit, it can make everything difficult for you.

Poor credit could result in higher interest rates, higher loan fees, more money required for a down payment or even denial for a loan altogether.

Have routine audits of your credit report from all three bureaus. Also, make sure they are all current and accurate.

If your credit contains erroneous blemishes, get them corrected before they are examined by mortgage lenders.

Not Knowing nor Understanding a Comfortable Purchase Price Limit

You need to have a transparent conversation with your lender about your finances.

Let the lender assess where you are and how you can move forward with a home purchase without stretching yourself too thin.

When buying a house, sticking to a solid budget will help you avoid getting in over your head. Be realistic about your take home pay and your spending habits.

A good loan officer will help you make a game plan to get you to homeownership without being “house poor”.

Being house poor means a buyer dumped all of their money into purchasing the house but doesn’t have enough money to maintain the house nor a comfortable lifestyle.

Not Getting Pre-Approved 

Having a pre-approval in hand is ideal before making an offer.

Although it is possible to submit an offer a with a pre-qualification letter, your chances of your offer being accepted drastically increases with a pre-approval.

Sellers need to know that their home is going to sell for their expected timeframe.

Having a pre-approval gives the seller the assurance that you could complete the purchase with minimal disruptions.

Not having a pre-approval at the time of making an offer, especially in a competitive market, can result in the seller leaning towards another buyer that is either paying cash or looks more qualified on paper. 

Not Shopping Around for the Best Lender

Many first-time home buyers end up paying for a more expensive, or less than ideal loan because they didn’t do their homework and shop for the best lender.

Get quotes from at least three different mortgage institutions to compare interest rates, fees, and terms.

Within 30 days, you are allowed 3 hard inquiries to your credit before your score is negatively impacted.

Not Understanding the Many Upfront Costs Associated with Homebuying

One of the biggest mistakes you can make as a first-time home buyer is to assume that the purchase price is the only important amount when buying a house.

In addition to the purchase price, you would have to consider inspections, appraisals, any conditions your lender may require to get you the loan that is best for you, any necessary repairs required to satisfy the loan and closing costs.

What are closing costs in NC?

Closing are the expenses associated with the purchase of the property. In North Carolina, depending on the purchase type, closing costs could range from 2%-5%. 

Opening a New Line of Credit Before Closing

If all of the conditions for your loan are met and your loan file was issued a “clear to close” from the underwriter you’re not out of the woods yet.

There would be one more credit check before closing and if you opened new credit accounts or made any large purchases, it could end in a loan denial.

DO NOT MAKE ANY LARGE PURCHASES during the purchase process of a home.

It is extremely important to exercise restraint and patience during a real estate purchase transaction.

Tell my buyers all the time “it is easy to buy a car after you’ve bought a house but it is almost impossible to buy a house after you buy a car”. 

Not Being Flexible with the Criteria

There is no such thing as “the perfect home” and, although this would be your first purchase, it probably won’t be your last.

Some great homes can be overlooked based on minor cosmetic, easy-to-fix details and it is commonly difficult for a first-time homebuyer to see the potential of a great home if those minor aesthetic defects existed.

In a market severely low on inventory, it is important for a buyer to consider all reasonable options in order to avoid competition.

Avoiding the rat race of buyers is a sure way to get a house at a bargain and to insure you don’t end up in a bidding war.

Disregarding the Area and Neighborhood

The house may look great but what about the neighborhood? Before making an offer, take some time to drive through the neighborhood.

If the opportunity presents itself, speak to several of the neighbors to get an idea of the lifestyle and comradery. Also, get the walk scores of the neighborhood.

Familiarize yourself with commute times to shopping, groceries, schools and work commute.  

Waiving the Inspection

I get it, you are in a competitive market and you don’t want to lose a great house.

There are other ways to have a competitive offer than to waive discovery of the possible defects.

Waiving inspections or anything else required within the due diligence period can be an extremely costly mistake, which can lead to large, unexpected expenses later.

Not Using an Agent

As a licensed real estate agent, we are obligated by means of a “fiduciary responsibility” to protect our client’s interests as a consumer– and only their interests.

In most circumstances, the seller pays both buyer and seller agent commission, so to a buyer, to have a legal representative is essentially free as you are assisted to navigate through  the home-buying process.

Never engage in such an important financial transaction alone for your first time. Too many things could go wrong.

Many first-time home buyers make this mistake when buying a new construction home.

The on-sight agent may be friendly and helpful, but that agent’s responsibility is only to the builder.

Denying legal representation when building a house is a mistake, especially when the cost of that support is paid for by the seller.

It is great that you are finally ready to purchase a home and I applaud you reaching this life milestone. Be careful, do your homework and surround yourself with individuals who have your best interests at heart. If you follow these steps carefully and correctly, your first home purchase won’t be your last. 

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