Yahoo Finance 5 Rookie Mistakes Homebuyers Should Avoid
Everyone makes mistakes. It happens. However, the impact of our mistakes is not always the same. When a homebuyer makes mistakes on their home purchase, it can have devastating effects on their finances and living circumstances for years to come.
Millennials are quickly becoming the largest group of homebuyers in the U.S. As they start to enter the market for the first time, there are some common rookie mistakes that will likely be made. These mistakes can easily be avoided with some basic understanding of the home buying process.
[See: The Best Apps for House Hunting.]
Here are 5 rookie mistakes that every new homebuyer should avoid.
Looking at homes outside of your price range. When new homebuyers are thinking about purchasing their first home, they're probably going to use a website or app to browse available homes for sale. Shopping for a home online is easy. Some might say it's too easy.
Experienced homebuyers know how quickly someone can get sucked into looking at homes in a price range where they would never actually buy. Once people start imagining themselves in homes that are out of their price range, they find it hard to come back down to the lower priced homes of their reality.
Before you look at any homes online or in person, make sure to set your budget first and then stick to it -- no matter what.
Looking at homes before being fully preapproved. Some first-time buyers will talk to a mortgage lender over the phone, but never actually submit their financial documents for a finalized mortgage preapproval. They will tell their real estate agent that they have been preapproved for a mortgage, when truthfully they still need to work through the details.
This is a big mistake. Shopping for a home is an exhausting, emotional rollercoaster. It takes a great deal of time and energy for everyone involved. Some home buyers will go through much of the process, only to find out later that they are not actually approved to buy a home. It can be heartbreaking.
Before looking at any homes in person, be sure to complete a full mortgage preapproval from a highly rated professional mortgage company.
[See: 10 Ways Millennials Are Changing Homebuying.]
Walking into the local bank to get a mortgage. When first-time homebuyers find out the first step to buying a home is to get a mortgage preapproval, they often decide to simply go to their local bank and ask for a loan. This is not necessarily a bad thing, if their local bank offers competitive rates. Unfortunately, many times the local bank only dabbles in mortgages and is not able to be very competitive.
The truth is that mortgage companies offer wildly different loan terms. Closings costs can differ by thousands of dollars, and different underwriting requirements will determine whether or not you are even approved. Every bank and mortgage company is slightly different.
Shopping around for the best mortgage makes the most sense. Research a variety of lenders to find the one that works best for you. Don't just settle for the local bank without comparing others. Maybe they are good, but you'll never really know without first shopping around and researching.
Using the first real estate agent you meet. Rookie homebuyers will often use the first agent they meet. Once again, this isn't always bad, but playing the odds isn't the wisest choice. It's best to do some research before committing to an agent. They have quite a bit of influence over a buyer's home purchase.
There are many different types of agents out there. Some are volume closers, some work very hyper, local niche markets, and others may only work part-time after their day job ends. Most any agent worth working with will have a visible online presence. Take some time and research your area to find agents who have a good track record and are responsive.
Homebuyers are required to put a lot of trust into their real estate agents' abilities and knowledge. Choose wisely and the whole transaction can go super smooth. Choose the wrong agent and everything can fall apart fast.
Making a lowball offer on your first house. When buyers are entering the market for the first time, there is a tendency to feel empowered and special. Homeownership is, after all, an accomplishment to take pride in. However, they might feel as though they are the only ones shopping for a home. The reality is that many real estate markets are very aggressive, especially in the lower price ranges. There will probably be some buyer competition.
It's common for first-time homebuyers to offer very weak terms on their first contract, because they need to test out the market. Most agents know their rookie buyers might need to lose a few negotiations before they can really understand how to structure an appealing offer that will be accepted.
If a buyer's goal is to get the best financial deal possible, then the lowball-offer strategy may work, over time. But if you want to to find a nice place to live that you enjoy, you need to be prepared to be aggressive enough to make the deal work. The best houses always solicit the most attention. If you want the best house, you need to be ready to fight for it.
[See: The 20 Best Places to Live in the U.S. for Quality of Life.]
Final Thoughts
If you're a rookie homebuyer entering the market for the first time, it's best to find some good professionals to get advice from. They will keep you from making costly mistakes and inform you of all your options throughout the transaction.
You may be tempted to get advice from family and friends, but unless they have bought and sold hundreds of homes, and know the data in your current market, they're probably not the best resources. Stick with the pros and research as much as possible -- it can pay off in ways you could never predict.
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