Buying your first home is a huge milestone in most people’s lives. It can feel very exciting, embarking on the hunt to find your first piece of real estate to call your own, but there are some mistakes that are frequently made by first time homebuyers which may be pitfalls on the path to ownership. We have some tips to help you become more market savvy and to avoid some of these potential errors.
Before you look at a property, it is very important to know exactly how much you can afford. You can use Setco’s helpful online calculator as a guide, but you may need to make adjustments based on your individual finances. How much are you currently paying in rent and do you struggle to meet that payment every month? What you can afford right now is a good guideline for what you want to be paying for a house payment.
Meet with a lender and get pre-approved for the most you can reasonably afford. Be sure to factor in the costs of home insurance, taxes, and any anticipated HOA fees. Once you have your total amount you can look for homes in that range. Pre-approval does not mean you have to spend that amount, it just gives you a goal to stay under.
Another common trap first-time homebuyers often fall into is not basing their calculations of how much home they can afford on their current income. Rather they project future expectations of earning, based on promotion, gaining an advanced degree or their homemaker partner finding employment. Unfortunately, this can cause problems if those things do not come to pass. It is best to only buy a home you can afford if you remain at your current income level. You may be in a better financial position a year from now, but you can’t predict the future, no matter how certain it may seem, and this is a case where “better safe than sorry” is absolutely true.
In the same vein, bear in mind that your first home is not necessarily your last home. No one likes moving, but as a first time homebuyer it is important to buy the house that suits your current needs, and the immediate future, rather than trying to plan now for the rest of your life.
As we mentioned earlier, it is very important to account for added costs of homeownership. Many times people figure out their mortgage payment without adding in the extra costs of insurance and taxes, which are notoriously high here in Florida, not to mention HOA fees. Then on top of all of those costs, if your down payment is less than 20 percent of the selling price, you may end up paying an additional cost of private mortgage insurance (PMI) to protect your lender. At the end of it all, if you’re not prepared, you could have a nasty shock when your estimated $800 mortgage payment winds up at a monthly $1,200.
Finally, in today’s digital age, it is tempting to navigate this path to homeownership on your own. It is so easy to look at real estate listings online and visit open houses without needing an agent to guide you, and mortgage lenders advertise easy online mortgages. However, real estate, title, and lending professionals are experienced in this process and will look out for your best interests. There are many benefits to having someone who has been through this many times on your side, people who have connections and in-depth knowledge that can benefit you.
At Setco, we are proud to be the #1 Title Company in the Florida Panhandle. We work with all parties in a closing transaction, and we understand that it means something different to each of them. Likewise, we recognize that each homebuyer has different needs, and we are able to custom tailor our services to meet them. We have top-notch online security to protect the privacy of your transaction while making things as convenient for you as possible. Click below to find out how we can partner with you as you work towards your new home sweet home.