Common Mistakes Made by First Time Home Buyers

As with most important transactions, “we don’t know what we don’t know”. This relates to real estate and other transactions for which we have little experience and is why it is important to consult an experienced realtor who can represent the first time buyer. Buying a home can be exciting and fun, however it can also be frustrating and exhausting unless you have done some prior preparation to determine affordability, future plans and needs.

In this situation, pre-qualification is extremely important to determine the price range of affordability. Many first time home buyers look outside of an affordable price range or look at interest only loans. Both of these are potential problem areas that have placed other buyers in difficult situations unable to afford monthly payments or upside-down, owing more on a real estate property than the current value of the property.

Another common mistake is not planning ahead. Will you be able to stay in the home you purchase for at least three to five years? What changes might occur in your family life? Are you planning to have children? Will a parent or other family member move in with you? Will your job require that you move or relocate? What happens if the house requires two incomes and one contributor loses employment? By planning ahead you can avoid placing yourself in a situation or a home that becomes too small, impractical, too expensive or one from which you will need to move before the home has had time to appreciate, allowing you to come out ahead financially when it’s time to sell.

Some buyers fall in love with a home by becoming emotionally involved in one aspect or another. They do not consider the location, school system, zoning, maintenance requirements, proximity to work and shopping or overall suitability. This is important for the resale value and long term potential of the property. A good realtor will advise buying in a neighborhood that will support resale of the property when the time arrives.

Other first time buyers lack focus by not narrowing their search to one or two physical areas of a city. Narrowing focus by location allows easier comparison of similar homes and other important considerations. It is also important to determine what is most important in the design of a home. Is there a requirement for at least three bedrooms? A fenced yard? Does the home need to be near schools? By focusing not only on location but requirements of a home, a realtor can save time by researching and previewing homes to make sure that only homes that meet your requirements are placed on your showing list.

Considering that a home is one of the most significant purchases of your life it is important to work with a realtor who can help you plan appropriately to make sure that your buying experience is the best possible.

Author Pamela Dombrowski-Wilson. Copyright 2008. Permission given for use by www.homesam.com

How Much House Can You Afford?

Most home buyers do not know where to begin when determining how much house is affordable. Typical wisdom begins by looking at a debt (mortgage payment, credit card debt, car payments, etc.) to income ratio of no more than 40%. Based on a monthly family income of $4,000 per month, this means your total debt should not be more than $1,600 per month. According to a mortgage calculator found at www.cgi.money.cnn.com/tools/houseafford/houseafford/html a family with this income could conservatively afford a monthly house payment of $780. This equates to a home price in the range of $80,000.

You’ve probably read the newspaper headlines. The current credit crises. A record number of homes in foreclosure. This is why it’s even more important to ensure that you are in a strong position financially to purchase a home. By contacting your bank or a local lender you can determine the strength of your financial background.

Many current home owners having issues purchased homes with little or no down payment and interest only mortgages. This means that the payments made pay only interest and do not reduce the principal amount of the loan. While these loans made it easier for many people to purchase homes, many buyers in this situation are “upside-down”, owing more on their homes than the current value of the home. Refer to the article on short sales if you find yourself or someone you know in this situation.

Other considerations include the length of time you can stay in your home. If you cannot commit to remaining in the home you purchase for at least three to four years, you will unlikely be able to recoup the transaction costs of buying and selling a home not to mention allowing enough time for the market to improve, allowing appreciation in the base price of your home.

How ownership also comes with added responsibilities. You’ll need to budget for regular upkeep and home repairs. When buying a home, it’s a good idea to purchase a home buyer warranty or request that the seller purchase this for you. The benefit of this is peace of mind that anything missed in inspection is covered by the policy. Normally for a deductible of $50 the policy will cover repair of electric, plumbing and heating systems. This type of policy can be renewed after the first year for an additional year.

In spite of the fact that many people believe they can save money by doing it on their own, an experienced realtor can guide you through the home buying process and actually save you money through negotiation and by representing you to ensure that the process goes smoothly. You also receive advice on making sure that you are purchasing a house in good condition in a neighborhood that will be likely to increase in value. There are also many other small details like clear title, absence of liens or easements, and that any issues that come up in home inspection can be properly addressed.

Article by Author Pamela Dombrowski-Wilson. Permission granted for use on www.homesam.com. Copyright 2008.