The Most Common Mistake First Time Home Buyer's Make
Buying your first home can be considered one of the biggest decisions you make in your lifetime. However, most people make a monumental mistake when thinking about buying their first home. Trust me, I’ve personally made the same mistake. So what is this monumental mistake most people make you ask? The answer will shock you, but first let’s talk about what goes into buying your first home and the common misconceptions that new buyers assume.
1) Buying a new home can cost a ridiculous amount of money. This statement is completely false. Homes range in price. You just have to make the determination of what kind of property want to purchase. You can find homes on the market in the 5-digit price range, most commonly condos.
2) You need excellent credit to get a great interest rate. False. As a First Time Home Buyer, you may qualify for multiple programs including an FHA Loan.
3) You need to come up with a sizable down payment. False. Buying your first home can cost you as little as 0% Down. Now you might be saying, No money down? Impossible! Well if you or your spouse serves in the military, you may be entitled to a VA loan, which could allow you to finance 100% of the cost.
4) It will always be cheaper to rent, plus I won’t be tied down. False Again. Rents can vary and just because you buy a home, it doesn’t mean that you have to live there forever. You may choose to eventually rent it to tenants and have them pay-off your mortgage and build equity in your property or you can always re-sell.
5) Closing costs can be really expensive. False again. Depending on where your buying your property and what kind of property it is, your closing costs will vary. Plus most buyers don’t realize that they may be able to negotiate with the seller. For Example, a buyer could pay closer to asking price and negotiate that the seller pay the buyer’s closing cost, freeing up cash.
6) When you make an offer on a house, you’re locked into that price. False. There are a number of things that could potentially lower that number like big-ticket issues found on an inspection or the property may not appraise.
7) My bank will give me the best interest rate because I’ve been doing business with them a long time. False. Most banks mortgage departments don’t talk to their accounting departments, which means that sense of customer loyalty you think you’re getting could be entirely false.
8) Putting money in the bank has a greater amount of return than owning a house. False. Homes often adjust for inflation, money sitting in your savings does not. Plus you can deduct the mortgage interest and depreciation from your taxes.
9) All Realtors are the same. False. Realtors come in all shapes and sizes, some with more knowledge, experience, and success than others. Some Realtors use Real Estate as a part time job on the side and only sell 1 to 2 houses per years while others depend on it as their primary source of income. Who would you rather work with, a friend that sells 1 house per year or an experienced Realtor that sells 15?
10) As a buyer, I have to pay my agent commission. False. Buyers don’t pay commission. It may be in your buyer agreement, but generally the seller pays the commission for both buyer and seller agents.
So yeah, as I mentioned there are a lot of common misconceptions that First Time Home Buyers have, but there’s one common mistake all of them make. They wait too long when consulting with a Realtor about the purchase of their first home. They make all these assumptions and more and because of that they delay seeking out answers. Speaking with a qualified Realtor and Mortgage Broker early on, can help you build a plan for your first major purchase. If I would’ve known what I know now, 20 years ago, chances are I would’ve bought several homes by now and had a pretty good investment portfolio. Instead, I waited and waited and waited way too long.
If you’re a parent with a kid finishing high school or starting college, this is one conversation you want to have with them ASAP. You may be helping them build a more financially stable future for themselves. They could be making a monthly mortgage payment for as little as $800 per month (Principle, Interest, Property Taxes, Insurance, & HOA included) and if they get a roommate well the possibilities could be endless on the savings.
Benjamin Franklin once said, “Time is money.” Never has this been more true than when investing in Real Estate.
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