The home buying process can be an emotional roller coaster especially if you are a first-time homebuyer. Buying a home in Northern Virginia can be especially tough as it is a very competitive market where homes do not last on the market past 30 days and multiple offers are usually in play. Therefore, it is important to be educated and not make common mistakes that many buyers make. In my opinion, the following are the biggest mistakes that first-time homebuyers make during the buying process.
Not Getting Pre-Approved
Looking at homes before getting pre-approved is definitely a mistake that most homebuyers make. Without getting pre-approved, it is very hard to say for sure what you can afford. Plus, if you do happen to find your dream home early in your search, you want to be already pre-approved so you can place a strong offer as soon as possible. To learn more about the pre-approval process, click here.
Not Checking Your Credit Report and Credit Score
Your credit report and credit score are two essential things that lenders use when determining the kind of mortgage they can provide you. If you are unsure of your credit score or do not have the best credit, you should be working to raise it months before you are ready to buy a home. To learn more about how you can improve your credit score, click here.
Confessing Your Love For The Home
Have you ever played poker? Well, if you have a royal flush (one of the best hands), would you blurt it out to your competition?? NO! The same applies when house hunting. Even if you walk into your dream home, don't shout it out to the listing agent or seller. Telling the listing agent/seller that you love the home is one of the quickest ways to lose your negotiating power.
Not Shopping Around For a Mortgage
Understanding the mortgage process is essential when buying a home as you will be making payments on it for the next 30 years! Differences in things like interest rates, discount points, and terms for the loan can result in tens of thousands of dollars in savings or losses over the course of 30 years. Therefore, don't just settle with the first lender that you talk to. To learn more about the mortgage process, click here.
Low-balling Instead Of Negotiating For Other Things Besides The Sales Price
The Sale-to-List Ratio in Arlington is roughly 98%. Meaning that homes almost always sell very close to what they list for. I am not saying there isn't room for negotiation but in this competitive market, making low-ball offers will only hurt you. It is better to negotiate for other things beside the list price like a seller subsidy towards repairs or a year of condo fees. If you are looking to buy new construction, builders will likely give you huge savings on things other than the sales price such as closing cost assistance, free upgrades, paid condo fees, etc... as a way to keep the sales price high for future sales.
Buying If You Plan On Moving In A Few Years
Buying a home is typically a long term investment in most cases. Since there are closing costs associated with buying and selling a home, it is not financially smart to buy a home and sell it a year or two later. It takes time to build equity and recover the initial closing costs and the costs associated with selling.
Borrowing As Much As Your Approved
Just because you are pre-approved up to $600,000, doesn't mean you should buy a house that is $600,000. You should always leave room for things that are unexpected like a major repair or an additional child. Some things you can never plan for. Therefore, it is much easier to live comfortably and upgrade than to default on your payments and downsize.
Forgetting About Hidden/Closing Costs
When saving for a home, most buyers only think about the down payment and are surprised by hidden/closing costs. For example, you need cash to pay for an earnest money deposit (normally 1-2% of the offer price) when submitting an offer, loan fees, inspection costs, and much more. The typical closing costs are right around 2-5% of the sale price. To learn more about hidden/closing costs, click here.
Thinking You'll Get Everything On Your Wish List
Unless you have the money to buy a new construction home or the money to renovate your new home, you are most likely not going to find a home that checks every box. Therefore, it is important to truly focus on your top priorities and be willing to compromise on everything else.
Not Considering The Resale Value Of Your Home
The average homeowner moves every 8 years. Therefore, when buying a home or doing a renovation, it is important to think about the resale process as it will eventually be you on the selling side of the transaction.
You can save a lot of time, frustration, and money if you avoid these classic mistakes. Check back next week for another great real estate tip of the week!