Five Mistakes First-Time Home Buyers Make
- Not getting preapproved
- Not offering enough earnest money deposit
- Skipping a home inspection
- Not understanding zoning and HOAs
- Falling for Wire Fraud
When you’re buying a home, there are many things that you need to consider. You’ll have to decide on the type of property, location and size of your new home. You’ll also have to consider what kind of mortgage is best for your situation. Although buying a first home can be stressful, there are ways to make it easier on yourself and ready yourself for your big day ahead.
Not getting preapproved
Here’s an easy rule of thumb: if you don’t get preapproved before looking for a home, you will pay more than necessary.
Getting preapproved for a mortgage means that your bank has analyzed your credit, income and savings and decided that you are likely to be able to afford the purchase amount. You can then use this information as leverage when negotiating with sellers who will know they aren’t wasting their time with buyers who may have trouble getting financing after all.
The benefits of being pre-approved include: knowing how much house you can afford; having proof that you have enough money in the bank before making an offer; saving yourself time by avoiding showings with houses outside of your price range; and giving sellers confidence in their ability to sell their home quickly without having to wait for financing offers from multiple buyers.
Not offering enough earnest money deposit
You may have heard the term “earnest money deposit” before, but what exactly is it? An earnest money deposit is a good faith payment that’s made when purchasing a house. It shows the seller that you are serious about buying the property and will help you get your offer accepted by providing proof of your funds.
But how much should you offer as an earnest money deposit? That depends on where you’re buying, the price range of houses in that area and how much competition there is for those houses. For example, if there are multiple bids on a house then normally sellers will require higher deposits to encourage buyers to act fast instead of waiting until another bid comes through (and potentially losing out). However, if there aren’t many interested parties then they may accept smaller deposits or no deposits at all.
In general though: “$1 for every $10″ seems like good advice—so if we were looking at buying something priced at $500K then we might offer 5%. If it were more expensive than that then maybe 10% would be appropriate; but similarly if it were less expensive than 500K (like say 300K) then maybe 3% would suffice.”
Skipping a home inspection
You won’t know what’s going on with your home unless you have it inspected. You might not be aware of something major like a leak or mold problem until it’s too late, and by then you could be in for some pretty expensive surprises. A home inspector will help you understand the property better, so it’s easier for you to negotiate with the seller if needed.
A great deal of information can be gathered during an inspection that can help first-time buyers understand the overall condition of their new home. For instance, they learn how many square feet they’re buying and how much space is actually usable indoors and outdoors; whether there are any major structural issues (such as foundation problems); whether there are any hidden water damage issues; etcetera.”
Not understanding zoning or HOAs
When you purchase a home, do you know what rules will apply to it? Zoning laws and HOA covenants can affect your ability to use the property as you see fit. For example:
- Many zoning laws limit the number of pets that can live in one home.
- Some HOAs have rules about how much time people must spend at their homes, or what types of structures they can build on their property.
To find out if these or other restrictions might affect your ability to use your new home as you’d like, check with your city or town planning department before buying a house (and keep an eye out for signs when touring houses).
Falling for Wire Fraud
Wire fraud is a form of financial fraud that occurs when someone uses an electronic device to wire money out of the victim’s account. Wire fraud involves direct transfers from a victim’s bank account into another person’s bank account.
Tips to Avoid Wire Fraud
1) Call, don’t email: Confirm wiring instructions by phone before transferring funds. Use a trusted number from the Title Company’s website or a business card. Don’t call the number in the email.
2) Be Suspicious: It’s uncommon for Title Companies to change wiring instructions and payment info. If there’s a change, stop, and double check.
3) Confirm it All: Ask your bank to confirm not just the account number but also the name on the account before writing money.
4) Verify immediately: Call the Title Company to confirm that the funds were received.
When buying a home, make sure to get preapproved, offer an earnest money deposit, get a home inspection, be aware of zoning and HOAs, and double check the wiring instructions.
To ensure that you are able to buy the home you want, it is important to get preapproved and offer an earnest money deposit. A home inspection will help you avoid purchase mistakes later on, while being aware of zoning and HOAs can save time and money in the long run. Lastly, double check the wiring instructions before purchasing a house!
Avoid these Five Mistakes First-Time Home Buyers Make. Get preapproved, offer a good earnest money deposit, get a home inspection, know their zoning and HOA rules, and double check the wiring instructions before closing on the sale of their new home.