McGuire Real Estate

First-Time Home Buyer Mistakes You Can Avoid

by Eun Young Lee 08/04/2019

With so much to think about these days, it is not surprising that some first-time home buyers make mistakes they later regret as they shop for a home for sale. Presented here are some of the most popular mistakes, along with tips to help you avoid a similar fate.

Looking for a home before getting a mortgage

Many first-time buyers make the mistake of seeing houses first before ever scheduling an appointment with a lending institution. In some big markets, housing inventory is still tight, and competition is so frightening. You might discover that you are eager to spend more to buy a property, or lose a property because you are not even pre-approved for a mortgage.

What is the solution to this? 

Before you fall in love with that perfect dream house you have been looking at all this while, ensure you get a complete underwritten pre-approval letter. Being pre-approved sends the signal that you are a serious buyer whose credit and finances are ready to get a loan successfully.

Buying a house that your financial muscle cannot carry

It’s easy to fall in love with houses that might make you spend more, but over-stretching yourself can cause you regrets later. It could even put you at higher risk of losing your home if you fall on the unpleasant hammer of hard financial times.

Any remedy? 

The best way to overcome this issue is to concentrate on the monthly expenses you can genuinely afford instead of looking at the highest loan amount you qualify for. Just because you are eligible for a $250,000 loan, that doesn’t mean you can afford the monthly payments that come with it. Factor in your other financial obligations that do not show on a credit report along with additional home expenses like insurance and taxes when deciding on how much house you can afford.

Emptying your savings just to buy a house

One of the biggest mistakes you can make is spending every dime you have. When you invest all your cash, including your savings on the down payment and closing costs, you set yourself up for disappointment. It will do you no good.

Some people make the mistake of spending all they have saved to make the required 20% down payment, so they don’t have to pay for mortgage insurance. However, they are making a grave mistake as they are left with no savings at all.

Homebuyers who pay 20 percent or more down do not have to pay for mortgage insurance when getting a conventional mortgage. That often translates into significant savings on the monthly mortgage payment. However, it is not worth the risk of living on the edge.

Here comes the solution.Let your aim be to save three to six months of living expenses in an emergency fund. Paying mortgage insurance is not the best, but killing your emergency or retirement savings just to make a sizeable down payment is even more of risk.

Talk to your real estate agent about their mortgage and lender recommendations and get yourself pre-approved for a realistic mortgage before starting your home search.

About the Author
Author

Eun Young Lee

Eun Young “EY” Lee has been living in San Francisco for the last 17 years. Over those years she has fallen in love with this beautiful city, the great food, incredible parks and mild weather. She enjoys exploring San Francisco’s different neighborhoods and seeing the unique character of them all. This exploration of the City and its neighborhoods sparked her interest in real estate.

EY grew up in New Jersey and New York, and is a graduate of the University of Pennsylvania. She has over 15 years of experience in market research and client services. Her success in the corporate world was derived from understanding her clients’ needs. This translates to a real estate agent who excels at assessing what each client wants and needs. This, combined with her knowledge of San Francisco, positions EY well to help clients find and sell their home by the Bay.

When not working, EY is an avid tennis player and can be found playing tennis throughout the city from Golden Gate Park to the Golden Gateway along the Embarcadero. She also enjoys making pottery at the Sharon Art Studio, skiing, and enjoying all the great food in the City and the Bay Area.