- First-time homebuyers make up roughly a quarter of homebuyers in the U.S.
- Partnering with the right professionals can make a big difference when it comes to landing your dream home.
- Avoiding financial missteps and acting decisively are two key components to success.
According to the National Association of REALTORS®, first-time homebuyers made up 26% of all homebuyers in the United States in 2022. That means if you’re just diving into the market for the first time, you’re in good company!
As a first-time homebuyer, it’s important to be both educated and curious when preparing to buy — and to find a trusted, local market expert to represent you. Of course, there are also missteps you should watch out for. Here are five mistakes that first-time buyers commonly make, and how to avoid them.
Mistake 1: Relying on online information only
It’s easy to assume that the internet knows all, and we understand the appeal of doing your own research. But the reality is that buying a home is likely the biggest purchase you’ll ever make... and it’s also an extremely personal and often complex one.
Many first-time buyers start out by researching homes online. This is a great introduction to the home-buying process, but it’s also important to have local experts by your side.
Every homebuyer is different, and so are their needs and wishes. At Edina Realty, we have more than 2,000 licensed, professional Realtors who can guide you through a customized buying experience. Meanwhile, our Edina Realty Mortgage consultants will help you find a loan that best fits your personal financial situation.
Once you’ve completed your initial online research and prep work, reach out to Edina Realty or your preferred Realtor to get connected with local professionals who can offer more than online calculators and forums.
Mistake 2: Not having the right paperwork
To stand out in this low-inventory market, it’s important to get pre-approved by a lender in advance. Once you’re pre-approved, you’ll have a lender-approved estimate of your buying power, and you’ll be able to confidently search for homes in your true budget. Sellers and their agents may also take you more seriously if they know that you can obtain the necessary funding to buy the home.
The pre-approval process is becoming more automated, but you may still be asked to submit financial records, including:
- Pay stubs or income verification
- Bank statements
- Credit report
- Past taxes and W-2s
- Savings account or investment account records
In some cases, lenders may be able to offer better rates or terms to buyers with cleaner credit or other indicators of financial security — so it’s important to have these records handy when you are in the pre-approval process.
Your agent can guide you through this process, or you can request to get pre-approved by an Edina Realty Mortgage consultant.
Mistake 3: Focusing on the wrong financial indicators
If you’re planning to buy soon, you likely have a nest egg saved for your down payment. (If you don’t, get some tips and tricks for saving for a down payment.)
While the down payment is an important part of getting a loan, your lender will also closely scrutinize your debts and how they impact your ability to pay for your mortgage and other home-related expenses. In some cases, the loan officer may require you to lower your debt obligations in order to secure a mortgage.
From there, you’ll work to pay off credit cards, student loans, car loans, child support payments, and other outstanding debt before you can re-apply for a loan. During this time frame, it’s also important that you avoid taking on new debt. Avoid purchasing a new car, large electronics, or other expensive products when applying for a loan or buying a home.
Mistake 4: Moving too slowly
As prices grow and first-time buyers enter the market, low-priced listings (often called “starter homes”) can be scarce. Buyers are typically not advised to rush into the process, but today’s conditions do require buyers to move somewhat quickly. So, what’s a buyer to do in this unique, low-inventory market?
This is where your agent’s advice will come in handy. Together, you can identify the “must-have” features of your future home, then tour a few homes to get a feel for what is realistically available in your price range. When you know what’s most important to you, you’ll be able to quickly disqualify homes that aren’t right, and make a faster offer when you find the home you’ve been waiting for.
Mistake 5: Saving money by forgoing a home inspection
Many buyers start to get sticker shock as they calculate the cost of the closing, home insurance, taxes, and future upgrades. While it can be appealing to nix some home-buying costs, we recommend that buyers go through with a home inspection.
By hiring a professional to inspect the home, buyers can ensure that the systems and appliances are in working order and that the home is likely free from issues relating to the foundation, ventilation, roofing system, water damage, and more. If issues are identified, the buyer and seller will negotiate (via their Realtors) to determine if the seller will handle repairs or replacements before the sale, or credit the buyer for the work at closing. In some cases, the seller may refuse to make the requested repairs and the buyer will have to determine if they want to proceed with the sale.
The U.S. Department of Housing and Urban Development data shows that the average cost of a home inspection is between $300-500. While that may seem like a lot, most issues or defects identified in the inspection would cost much more than that to fix down the road.
The market is competitive for first-time buyers, and playing the game smart is the key to your home-buying success. To get started on buying your first home, contact Edina Realty or your agent and we’ll provide insights that will help you move forward and avoid these common first-time buyer mistakes.