With record-low interest rates, rock-bottom home prices and no house of their own to sell, many young adults are well-positioned to purchase their first home. If you’re ready to become a homeowner, watch out for these common first-time-buyer mistakes.
- Not getting a preapproval. Before you start your home search, meet with a lender or mortgage broker to determine how much money you are qualified to borrow. Having a preapproval letter in-hand offers peace-of-mind to you, the seller and your real estate agent.
- Overestimating what you can afford. Sit down with a financial planner and go through your income, expenses, and investments. You may discover that you aren’t comfortable spending what your lender believes you can afford.
- Underestimating the costs of homeownership. The expenses of owning a home go beyond your monthly mortgage payment. As a homeowner, you’ll be responsible for costs landlords usually cover, including property taxes, insurance, association dues, utilities, maintenance and repairs.
- Failing to think long-term. Cosmetic details that you can change should not discourage you from buying a home. Whether you’re planning to sell the house in a few years or make it your forever home, finding a home in the right neighborhood or one with a new furnace may outweigh drawbacks such as a slightly outdated kitchen or bath.
- Spending all of your money. Avoid draining your savings to purchase a home or offering the maximum amount you’re qualified to borrow. You want to have money left over to cover unexpected expenses that could arise after you buy.
- Forgoing an inspection. Before celebrating the fact you’ve found a home you love, hire a professional home inspector to find any problems that could impact your decision to buy.
- Forgetting the contingency clause. Your contract should include a clause that allows you to back out if your loan falls through, the home doesn’t appraise at its sale price or you lose your job.
Real estate agents can be helpful resources for first-time buyers. Review these tips for hiring a real estate agent before you start house hunting. And schedule time to talk with your State Farm® agent to learn more about homeowners coverage.
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