It’s always been tough to be a rookie home buyer, but it’s rarely been tougher than it is now. According to the New York Times, only 35 percent of homes purchased in 2016 went to “first-timers.” That’s not a lot. And the news gets worse: Over the past few years, the number of starter homes available has dropped dramatically while the price of starter homes has been on the rise. All of this is a recipe for a housing market that’s high on hopes and low on inventory.
In other words, buyers beware.
Don’t worry though. We’ve done this before. Here are 5 first-time home buyer mistakes you can avoid that will save you stress, heartache and regret.
First-Time Home Buyer Tip #1: Buying More House than You Can Afford
One of the most crucial steps is figuring out what you can afford. And don’t be alarmed it might be less than you think. Just because a bank or an online mortgage calculator gave you a number, doesn’t mean you’re in the clear. You need to think about your finances holistically to determine what you can and can’t afford!
Here’s a handy exercise that’ll help you avoid this first-time home buyer mistake: Figure out what budget you’ll be operating on after you’ve purchased your new home (see point 4 for some unexpected expenses you should include), then try living on it for no less than four months. Think of it as a practice run to make sure you’re not getting in over your head. If it works out, great! You can move ahead with that budget in mind. But if it doesn’t you can adjust down until you find the level that truly works for you, no harm done.
First-Time Home Buyer Tip #2: Compromising on the Wrong Things
If you’re a first-time home buyer, you’re probably okay with making some compromises. There’s a reason it’s called a starter home, after all. That said, it’s important to know what’s fine to compromise on, and what isn’t. Here are a few potential first-time home buyer mistakes to avoid:
Commute: You might think adding an extra 20 minutes to your commute isn’t a huge trade-off, but keep this in mind: Studies show that your happiness is directly related to your commute. Be leery of anything over 90 minutes a day.
School District: Even if you don’t have kids and don’t plan on having kids, buying a home in a good school district can be important for your home value in the future.
Floor Plan: You may not get everything you’ve dreamed about in your first home, but if you’re looking for three bedrooms, don’t settle for two. If you need a home office, don’t convince yourself that the walk-in closet can double as a workspace. On the list of things you might have to compromise, put floor plan at the bottom.
First-Time Home Buyer Tip #3: Falling in Love Too Quickly
Some homes are love at first open house. These are the ones you need to be suspicious of. Home buying requires a cool head — and first-time home-buying all the more so. Here are a few ways to cool off and avoid potentially making easily avoidable first-time homebuyer mistakes:
- Take a long walk around the neighborhood. Take in the sounds, the other homes, the overall vibe.
- Visit the home at different times of day and night to see how the light makes the place feel different.
- Test out the drive to work. Check the traffic patterns.
- Actively look for things about the house that you don’t (These will become obvious to you later on.)
Sure, it’s important to love the house you buy. But homeownership is more like a marriage than a fling. Make sure your new home can go the distance.
First-Time Home Buyer Tip #4: Not Budgeting for Extra Expenses
You’re probably already aware of closing costs, inspections, appraisal fees and escrow deposits. (Don’t worry if you’re not. Here’s a quick guide.) But expenses often don’t stop there. One of the biggest potential first-time home buyer mistakes you can make is letting these costs surprise you, so here are a few extra expenses that first-time home-buyers often overlook:
- Future property taxes
- Repair and maintenance
- Association dues
- Monthly bill increases
There’s a lot to know when buying a house. So get informed. But don’t forget, buying your first home should also be fun. Avoid the first-time home buyer mistakes above, and you’ll be well on your way to a happy new home.