Buying a home for the first time is comparable to the first time you ride a bike. You can learn about how it works from your parents and observe it from a distance, but you really won’t know the ins and outs until you actually sit down on the bicycle and start riding.
Like most beginners, first-time home buyers will likely make a few mistakes as they initially go through the home buying process in the upcoming year. Here are six mistakes that first-time home buyers will make in 2017, and how to best avoid them.
1. Waiting too long to make an offer
One of the biggest mistakes first-time home buyers will make in 2017 is simply waiting too long to get into the real estate market, according to Jay Carr, a senior loan advisor for RPM Mortgage in Newport Beach, California. Because the rates look like they’re going to continually increase over the year, it’s important for buyers to get in as early as they can so that they can avoid paying more later on. If you see a home that you’re interested in and you have been thinking about entering into the market for some time, don’t hesitate too long.
“The most important thing is to just get into the market,” Carr advises.
2. Trying too hard to get less than the asking price
Many first-time buyers are younger, tech-savvy, and are comfortable researching homes on their own. Overall, these are positive traits in a buyer. However, because these buyers are typically self-sufficient when it comes to other purchases, they often think they know best when it comes to what price they want to offer.
“Buyers rely too much on what they see on the Internet instead of the good advice of what they would hear from a real estate agent,” Carr says.
Of course sometimes it pays off to be bold in an offer (in that you get to pay a lot less than the asking price), but often it can end up that the buyers are negotiating themselves out of a deal. It’s important to pay attention to your real estate agent, who is a seasoned professional, when it comes to putting in an offer so that you don’t offend the seller and lose the house that you want.
3. Thinking you have to have a larger down payment
Carr says that most first-time buyers have grown up with the advice that you have to have a 20% down payment secured before you can enter into the housing market. Though of course it’s always great to have as much money saved up as possible before you purchase a home, don’t worry if you don’t have that magic number of 20%, and don’t let it prevent you from purchasing.
There are many options for first-time home buyers to buy a home with less than 20% down. Some lenders offer loans with down payments of 10% or less. These loans come with additional costs compared to loan programs with a full 20% down. Or you can look at the Unison HomeBuyer program, which contributes up to half of your down payment in return for a share of the appreciation or depreciation in your home’s price when you choose to sell.
4. Wanting the dream house right away
Everyone has a picture in their minds of what their first home will look like. Whether you envisioned a craftsman bungalow near all your favorite bars and restaurants or a classic ranch-style home with tons of land and no neighbors, chances are that you’re going to have to trade up to that dream home from your first starter home. Carr has a good rule of thumb on figuring out what kind of house you can afford.
“If you really like the house, you probably can’t afford it. If you think the house is just kind of below what you want it’s probably right in your price range. Get in the market rather than wait to get the dream house,” Carr says.
Carr advises those in the hunt for their dream home to focus on becoming homeowners now and to wait on their dream home until they have built up equity and have higher incomes in the future.
5. Not having your own representation
Another mistake a first-time home buyer can make is not having their own representation (meaning that they use the seller’s agent as their own buyer’s agent). While this is not always a bad situation, Carr cautions buyers to be careful that they have selected a good and trustworthy real estate agent that is looking after their best interests. In other words, you don’t want to pay an unfair price because someone is looking after their own best interest.
6. Believing this has to be your last house
When you look at the mortgage terms, which are most often 15 or 30 years, buying a house can feel a bit permanent. However, that needn’t be the case. Though buying can be more permanent than renting, you aren’t locked into your first home forever (unless of course you want to be). The median tenure of a homeowner in 2017 is about 10 years. But for the 20 year period before that it was only six. Believing that this won’t be your last house can take a bit of pressure off the home being perfectly suited for you.