The majority of homeowners will tell you that the homebuying process is exhausting, but also quite exhilarating at the same time. They’ll tell you about their search for the perfect home and how exciting it is to own your first home. But, more importantly, they’ll tell you about the mistakes they made and what they wish they knew before diving into the journey.
While it may be intimidating to listen to these homeowners’ biggest obstacles, it’s also necessary to be informed about what not to do. The more mistakes you hear about, the less mishaps you’ll experience and the more prepared you’ll be when it comes time for you to buy a home. To help you avoid making some common mistakes, check out these three things current homeowners wish they knew before starting the homebuying process.
1. An emergency fund is essential. One thing most first-time homeowners will tell you is that once they signed on the dotted line, they faced unanticipated expenses that actually required a lot of extra cash. Not only do most new homes come with certain fees and closing costs, but they also often require hefty tasks like siding updates, roofing repairs, and other property improvements shortly after closing. In fact, a recent report claims that 44% of new homeowners will experience one or more of these expenditures in their first year of homeownership.
That said, it’s critical that you build up a healthy savings account that prepares you for these costs. Cutting back on spending, setting up auto-deposits, and most importantly, saving as early as possible will best help you boost your savings. And, if later on down the road, you’ve already used up a chunk of your savings, don’t worry– there are options like home equity loans that allow you to use the equity you’ve built up in your home to acquire cash that can fund major home repairs.
2. Too much debt can ruin the homebuying experience from the get-go. Many adults dive into the homebuying process even though they’re not financially prepared. In the current market of potential homebuyers, a large portion of people have delayed buying a home due to an inability to get approved for a mortgage and a lack of means to afford a down payment, both heavily influenced by an individual’s amount of outstanding debt. In fact, millennials specifically have delayed home buying by 10 years compared to previous generations.
Amidst student loan debts, car payments, and phone bills, a budget can be hard to manage and buying a home can seem like a distant dream. Before you sign up for another source of debt as substantial as a mortgage and add on an additional monthly payment, eliminate as much debt as possible. Commit to a budget-oriented lifestyle and allocate a larger percentage of your monthly income to paying off credit card bills or student loans. That way, you’ll be more comfortable taking on another payment and lenders will be more likely to approve your mortgage application.
3. Pre-approval is a necessity. This might sound like a no-brainer, but it’s actually a common mistake. Believe it or not, lots of potential homebuyers begin touring open houses and are blindsided by the perfect home. They rush to find a lender and get approved for a mortgage and by the time they’re ready to put in an offer on their dream home, the sellers have stopped taking them or another offer has already been accepted.
This situation illustrates the importance of getting pre-approved for a mortgage, especially in a competitive market. The process can move very quickly, so you’ll need to have your pre-approval settled and your offer ready to deliver once you find the ideal home. Keep in mind too, that you shouldn’t settle for the first bank that grants you pre-approval. Shop around so you can find the right lender for you that best fits your financial situation and guarantees a good interest rate and monthly payments.
Don’t overlook any details throughout your house hunt. While nobody’s home-buying journey is perfect the first time around, you can better your chances of a smoother experience by reading insider tips like these.
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