Purchasing a home is a truly exciting experience, and also one of the largest investments made by many. You need to truly know and understand the entire process, all the time and costs it involves. Be sure to be prepared for everything financially, consult with your agent and lender for all the costs to be made throughout the transaction, especially those mentioned in the following list.
Not considering closing cost: As a first time home buyer, while budgeting, you might only be considering the down payment. However, it is very important to educate yourself on all costs involved during the transaction. Agent’s commission is the only cost you do not have to worry about, as this is paid by the seller as a percentage of the final selling price. You need to consider the costs of complying with all contingencies (including home inspections and appraisal costs), also, upon settlement, you will need to cover the large expense of closing costs. These are an estimate between 2 and 6 percent of the mortgage amount, and includes the down payment, attorney fee, credit report, survey, title charges etc. The lender lets you know this amount in advance through a good faith estimate. It is also important to consider moving expenses, such as moving company, updated fixtures, small improvements, etc.
Not considering the future. Being a first time home buyer is an extremely exciting process and overall accomplishment, but be sure to not be drawn to purchase the first home you see just because it meets your current needs. Think of the future, at least your five-year plan. Do you think you will want to start a family? Or maybe you will want to move?. Consider your future desires, and try to adjust them to your current needs.
Passing up the chance to negotiate. Make sure to find a real estate agent you trust and that explains the performance of the market and the entire transaction process. One possibility, if your agent has good connections, you might be able to buy a home off the market, this will prevent competition in a hot market, and depending on the needs of the seller they might be willing to bargain the selling price or willing to cover repairs to ensure the sale.
Not understand home inspections and other contingencies. During the transaction there are contingencies that must be met by both the seller and buyer. Home inspections will give you access to the repairs the home needs and depending on the conditions agreed upon on the contract you might be able to negotiate the costs of such with the seller or even void the contract if the damages are too costly, prejudice your health or you do not reach an agreement with the seller. Moreover, with an appraisal contingency, usually required by the lender company, you will be able to asses the true value of the property, if such does not meet the requirements put in place by the lender, and depending on the conditions on the contract, you might be able to void the contract and save your investment.
Not buying adequate homeowners insurance. Before closing, your lender will require the purchase of a homeowners insurance, ask your agent for recommendations and also shop around to find the best price that meets your needs. Look closely at what it covers, and consider that if your property is located in a flood damage zone, you will need additional or separate coverage for this matter.
Do not let this intimate you, be sure to always consult your agent with any doubt you may have throughout the process, and prior to starting the search, discuss with the lender your financial availability to cover all costs of the transaction.