Starting out on your first-time home buyer journey?
You have probably already learned that the process can be overwhelming, which always leads to homebuying mistakes and can sometimes lead to analysis paralysis but there’s no need to fret.
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Perhaps you’re a novice real estate shopper. Or maybe you have an investor’s drive. If you’re looking to make your real estate journey as simple as possible, you’re in the right place. This week and next I’ll be covering six common first time home buyer mistakes, and addressing how to avoid them.
Let’s dive into the first three homebuying mistakes:
1. Not knowing your budget
In my years of serving clients, I have seen it time and time again: someone calls asking to be shown a property, or asking for help in finding a house in my area. When I ask them what they have for a budget, I get either silence or stammers, followed by some version of “I’m not sure” or “I haven’t thought about it yet.”
Well, I’m here to tell you: no one else knows your budget better than you.
I’m not talking about what you think you can spend, or relying on some article or quick online calculator. I mean sit down and look at the nitty-gritty numbers of your income, spending, and savings patterns. Talk with a lender or financial advisor about your long-term plans and how homeownership fits within them. Understand all of the expenses that come with owning and buying a home, and know that you can handle them when it is time to write the checks.
That truly is the best place to start.
2. Not researching down payment programs
Down payments used to be much more simple. Banks wanted 20% down, and when you had that you got approved for a mortgage, shopped for a home in your budget, signed on the dotted line, and got the keys to your new place.
Now there are so many down payment programs out there, and they all fit circumstances differently. Historically high home values mean that it’s actually pretty rare for someone to come to the table with 20% down. This is especially true for first time home buyers. Working with a trusted lender is so important because they can help you understand all of your options, and the pros and cons that come with each.
3. Working with a lender or agent who want to upsell
Years ago, McDonald’s started their “Super Size Me” marketing program. Every time they sold a combo meal, the cashier was to ask the customer if they wanted to Super Size their meal to a large fry and drink. Studies showed that when people were asked this question, more often than not they did upgrade to the larger, more expensive meal.
Who exactly did this upsell benefit, I ask you? The customer? Nope. (If you’re not sure about this answer, check out the documentary, “Super Size Me”).
It only benefited McDonald’s, of course. The customer didn’t ask for a large drink and fry, so they obviously didn’t step to the counter with that size of hunger in their belly. They purchased the bigger meal because they were presented with the option to purchase it. As a result they got more food than they needed and spent more money than they intended to spend.
Some real estate agents and lenders operate the same way.
You come to their figurative counter with a desire–and a budget–for a home that suits your needs. Then they start asking you if you want to Supersize it. They may take you to houses out of your budget or show you features you never knew you wanted, or encourage you to stretch your budget beyond what you know you can spend. Before you know it you can’t tell your wants from your needs, and you spend more than you were planning.
Not sure what to look for in an agent to begin with?
Check out my post, 5 Important questions for some good insight on what to ask yourself and your potential agents.
Remember, I have three more critical homebuying mistakes for you to avoid, so be sure to check out next week’s blog post for Part 2 of this post.
In the meantime, if you’ve been wondering what your next step should be, download your free Buyer’s Guide today!
