USA Today printed its article on the five mistakes made by first time home buyers. Here are my five.
1. Not signing a Buyer’s Representative Agreement. I have had posts in the past about how important it is for a buyer to sign an agreement with a real estate agent. It is only in the best interest of the buyer to have one real estate agent dedicated to helping them find a home. Once you find one you like, sign the agreement!
2. Failing to realize how expensive it is to close on a mortgage. There will always be closing costs when dealing with getting a mortgage. I was told by another realtor that one should always account for about 11% of the sales price for closing costs on top of the down payment. This does not work in all cases, but it is a good estimate to keep in mind as you are figuring your closing costs.
3. Not putting in enough money for the down payment. If you have the funds available, it is always best (IMHO) to go with a conventional loan with 20% percent down. This eliminates the need for Private Mortgage Insurance (PMI) which can run up the total amount you pay over the lifetime of the mortgage. Government based loans are fine, but cash down is always the better option.
4. Overestimating how much of a home you can afford. I agree with USA Today on this one. You should determine how much of a home you can afford today, not on your potential income. You can never tell the future.
5. Being emotionally sensitive to everything. I know that home buying is an emotional process, after all you are buying your home. However, being too emotional involved into all the decisions can be draining for everyone involved. One needs to be “emotionally intelligent” and know when to hold in the emotions.