We’ve all bought things that we’ve later regretted: Be they those high-waisted jeans, pumpkin-spiced potato chips (they exist!), or the $189 electronic toothbrush your dentist said you had to have. At least the money wasted wasn’t a life changer. But what if you paid too much for a car and later realized you couldn’t afford it? That can amount to a significant financial hit. Now just think about the home-buying process. It’s more complicated than all those other purchases combined.
If you’re a first-time homebuyer, buying a house can be positively overwhelming. With an agent by your side to guide you through the process, you’ll make it through just fine — but you might want to be aware of these rookie mistakes. If you’re searching for homes for sale in San Francisco, CA, where the market is ultracompetitive, making one of these mistakes could end up costing you big time.
1. Getting too emotionally attached
You’re about to purchase what’s probably the most expensive item you’ve ever bought. So this advice from Chris Leavitt, a real estate broker with Douglas Elliman and star of Million Dollar Listing Miami, may be easier said than done: “Relax and don’t get too attached. There will always be another house if you lose one.”
Try finding “several homes you love so that you’re not too emotionally invested in one,” suggests Tali Raphaely, president of Armour Title Co.
2. Finding the home yourself
We know you’re going to browse Trulia to find homes for sale in your desired location. But don’t rely on just your brilliant research skills. Finding your own home is like “diagnosing yourself of an illness,” says Mirella Nazarian, partner associate of Omega Group Los Angeles.
“Let your agent vet the homes for you,” she says. A good real estate agent might find you properties that aren’t yet on the market. And of the homes that are on the market, your agent should be able to tell you “what the home looks like, where it’s situated, the Walk Score, and the price per square foot in the neighborhood.”
3. Going directly to the listing agent
If you’ve ever played Monopoly, there’s a card you might pick (a bad one) that says, “Do not pass go. Do not collect $200.” It means you did something wrong and now must pay the penalty.
The same applies if you go directly to a listing agent who is hired by and represents the seller, not you. “Unless [the listing agent] is someone you have worked with or know personally and know they are an amazing agent, this is a big no-no,” says Nazarian.
4. Assuming you have no rules to follow as a homeowner
One of the draws of homeownership is freedom: getting out from under someone else’s rules, whether those of your parents or your landlord. But some homes have deed restrictions that come with conditions.
Deed restrictions vary, depending on the community you’re buying in. Their purpose is typically to ensure the property holds its value, which is a good thing. But if you have plans that conflict with the restrictions, you won’t be a happy camper.
“Get copies of the restrictions, read them, and ‘look under the hood’ at the internal health of the condo or homeowners’ association,” says Robert Tankel of the Tankel Law Group in Florida. Look to see whether reserves are kept, the neighbors are paying their assessments, if there are pet restrictions, and whether you can run a business from the home.
5. Not saving enough money
If you saved up enough money for a down payment, kudos. That’s a huge accomplishment. Unfortunately, it’s only the tip of the iceberg. “Transitioning from a renter or your parents’ home to your own home has incidental costs that may be overlooked,” says Aisha Thomas, associate broker with The Thomas Agency of Georgia.
Thomas suggests that buyers have two to three months worth of mortgage payments in reserve. You should also count on paying closing costs (between 2% and 5% of the home’s price) and property taxes. After moving day, you’ll also need to buy household essentials you’ve never owned before, such as appliances, tools, and garden supplies.
Travis Sickle, a Florida certified financial planner, recommends having three to six months of expenses saved up in an emergency fund. “It’s not money to buy new furniture or remodel a room,” he says. “It has to be for the unexpected expenses, such as a leaky roof.”
6. Not getting pre-approved for a loan
You’ve run the numbers several times now and know just what you can afford. That’s great. But if you want your offer to be taken seriously by the seller, get proof of income and assets in the form of a pre-approval letter from a lender.
“This process can take just a few days and simply means that the lender has looked through your financial situation and is comfortable with the idea of lending you a certain amount of money,” says Bianca Mitchell, an agent with Keller Williams in Santa Monica, CA.
7. Paying private mortgage insurance (PMI)
If you don’t put down at least 20%, you’ll have to pay PMI, or what Kelly Hager, CEO of Kelly Hager Group Real Estate Services in St. Louis, jokingly calls the “higher-payment thingie.” Many first-time buyers pay this, she says. If you do, make sure you notify your lender when you pay down your mortgage and owe just 80% of the home’s value. Your lender will automatically cancel your PMI when you owe 78%, but you don’t want to pay a month more of PMI than you have to.
8. Not checking the price of homeowners’ insurance
Buying a beach house is a dream come true for many people. But make sure you can afford to insure that home by the water because it could be pricey. “Being on the beach, wind insurance is expensive, and there’s a higher risk of flood,” says Kent Owen of Heritage Insurance of Alabama. Other factors may increase your insurance, such as if your new home is located near a fault line (earthquake-prone), has a pool, and more.
9. Not checking your credit score
Here’s a weird trivia fact: About 42 million credit reports contain errors. True, the error might be just a misspelling of your street address, which wouldn’t affect you. But some errors could hurt your score badly, such as showing you have late payments when you don’t.
“Check your credit at least three months prior to house hunting,” says Jeanne Kelly, credit expert. If there’s an error, ask the credit bureau to kindly fix it. Your interest rate depends on it.
10. Not getting a home inspection
All homes need inspections, even brand-new ones. But some homebuyers skip this step “because they get emotionally attached to the home and want it no matter what,” says Steven Annese of EliteFixtures.com. If the home does have issues, you’ll want the seller to fix them or to lower the price.
If you’re first-time homebuyers, you might be a bit shy about asking the seller to fix that stuck window or leaky faucet. “The reality is that the buyers who ask for more often get more,” says Josh Muncey, an agent in the Jamaica Plain neighborhood of Boston. So don’t be afraid to speak up and get outstanding issues fixed before you sign those settlement papers.