According to a 2018 study, 40% of first-time homebuyers said that the process of purchasing their first home was the most stressful event in their lives. While we agree that your journey toward first-time homeownership is a huge deal, we don’t think it needs to be so overwhelming.
One way to ensure you’re taking the right steps is to know which mistakes to avoid. The following are six mistakes that new homebuyers make — and what to do instead.
[Related: Your Seattle Down Payment Guide]
Buying While in Debt
Although you might be anxious to start your home-buying journey, your first step really should be to take a look at your finances. If you’re in debt, you should put buying a home on hold until you can manage to pay off your debt and get on top of your financial situation.
Creating an emergency fund is recommended. An emergency fund is defined as a stash of savings you set aside that can cover financial surprises and emergencies. With an emergency fund, you can feel secure that these unexpected events won’t take too harsh a toll on your everyday life, and that you’re prepared. The general rule of thumb is to save three to six months of your typical living expenses.
Once you take care of your existing debt, create a solid emergency fund, and save up for a good down payment, you’ll be in a great place to start your home-buying journey.
[Related: Guide to Buying a Home in Seattle]
Being Confused About Your Down Payment
Saving up for the down payment on your mortgage is a crucial step in preparing to buy a home. Unfortunately, many individuals anticipate having to put down a lot more or a lot less than they actually need to.
The average down payment most homebuyers across the U.S. typically end up putting down is 6% of the home’s cost, compared to the 20% down payment norm many people think of.
What does this mean for you? It depends on where you’re located. For Seattle, one of the most expensive housing markets in the country, the average home costs approximately $750,000. This is nearly double the average cost across the country, which is around $408,800.
If you live in an expensive housing market like Seattle, you can anticipate saving a lot more for your down payment than if you were purchasing a home in the rural midwest. Although you can always pay the minimum down payment, be sure to consider the interest and fees that will occur for the length of your loan’s term.
[Related: Why Waiting to Save a 20% Down Payment May Not Be the Right Move]
Looking for a “Perfect” Home
You probably have an image in your mind of your family’s perfect home. Although having goals and standards is essential to choosing the best house for your first home-buying experience, remember to have an open mind.
The perfect home might not exist at first — or be entirely out of your budget. Make a list of things you can compromise on, or what additions and renovations can wait until later on down the road, so that you can find the best option for your family at this point in your life.
[Related: 2021 Housing and Mortgage Trends]
Rushing the Process
One of the biggest mistakes new homebuyers make is rushing the process. Buying a home for the first time is exciting, so you may feel the urge to jump at the first opportunity, or settle for the first home you take a tour of.
Rushing into the home-buying process is dangerous — you might end up stuck in a contract with a home you don’t really love, can’t really afford, or that needs a lot more work than you originally anticipated. Take your time to do research, secure your finances, and consult with professionals before buying your first home to make sure everything goes smoothly.
[Related: The Best Times to Buy a House in Seattle]
Not Knowing How Much You Can Afford
Knowing how much you can afford before you start looking for a house is essential. If you aren’t sure of your budget when you begin the process, you may end up falling in love with a home that is too expensive, or below your optimal price level.
Before hunting for your first home, be aware of your credit score. What’s holding it back, and can you take any immediate steps to raise it?
Check your score for errors as well. In a nationally conducted survey, 12% of individuals who have checked their credit score found errors, and of those 12%, over half who reported the errors were able to get them remedied.
You might also use resources such as an online mortgage affordability calculator to be knowledgeable about where you stand and what can work best for you. Look for a home you love that you can still make comfortable monthly payments on.
[Related: Important Tips for Millennial Homebuyers]
Not Looking Into All Your Options
Many first-time homebuyers make the mistake of not looking into all of their available loan options. A lot of states across the U.S. offer low-down payment options, first-time homebuyer offers, and other programs for down payment assistance.
Remember to get more than one rate quote as well. Mortgage rates vary from lender to lender, so compare rates to ensure the best deal.
You can also research loan possibilities such as VA loans for veterans, USDA loans for low-income individuals, and federally assisted loans.
[Related: 15 Essential Questions to Ask When Buying a Home]
Consult With a Real Estate Professional Today!
At Seattle Mortgage Planners, we know that buying your first home is an important — and at times overwhelming — journey. That’s why we’re here to help at any point along the way.
Our goal is to get you set up with your ideal home with the best loan at the right rate. Contact us today for a consultation and let’s get started.