Looking for a home first and a loan later: This is one of the most common mistakes first time buyers make. Before you spend time searching for homes that may be out of your price range, which will only lead to disappointment, visit a lender to find out what you can actually pay! Even if you think you make plenty of money and have a down payment in savings, your mortgage broker will look at the whole picture, including your debt-to-income ratios and credit score, to determine what price you can qualify for.
Maxing out your budget on your mortgage payments: Now that you’ve determined the maximum purchase price you can afford, consider if that amount really makes sense in terms of your budget and lifestyle. Your lender will be able to break the sales price down into estimated monthly payments. Use that number to determine what is comfortable for you to pay monthly. After all, you don’t want to be “house rich” but not have any money to enjoy the rest of your life!
Using up your savings on the down payment: When people are considering purchasing a home, they assume that all of their savings will go towards the down payment. In reality, there are other costs that come with buying a home that you will have to pay as well. Closing costs can be about 2%-5% of the total purchase price, which definitely adds up. While in some situations you can work the closing costs into the loan, or have the seller cover them, that is definitely not something to depend on. In addition, inspections can cost anywhere from about $350 to upwards of $1000, depending on which inspections you choose to get. You will also want to keep money in your savings for emergencies after closing!!
Putting too much faith in online loan information or home values: We can find so much great information online that it is easy to forget that not everything on the internet is true. NEVER TRUST A ZESTIMATE!! Automated home values are rarely accurate, but buyers (and sellers) tend to get caught up in them. Using an online loan program might seem like a quick and easy solution, but trust us when we say that it will often come back to bite you in the long run. Talk to one of our Realtors and we will make sure you don’t have to spend any online research time!
Going directly to the listing agent: It is a common misconception that by going straight to the listing agent you can save money on the house and get a better deal. However, the seller has already agreed on a commission to pay, so if you don’t have a buyers agent the listing agent just gets all of the commission, which does not save the buyer any money. In addition, the listing agent works for the seller and is required to act in the sellers best interest. Therefore, you will have no one looking out for you during the transaction, which will most likely result in you losing money in the long run. Do yourself a favor and work with a buyers agent!
Being too picky & lacking vision: In a competitive market such as Portland, the seller really has all the control. Oftentimes there are multiple buyers competing for the same property, and the sales price will go much higher than the list price. Buyers are having to compromise on what they want and get a home that may not fit exactly what they are looking for. Maybe you have to live a little farther out from the city as you wanted, or maybe the yard won’t be as amazing as what you imagined. That is ok! This is your first home, but it is certainly not your last! You will likely move in 5-7 years, and will be able to re-invest the equity that you have gained in your home over those years into a home that better matches your dream house. While you are at it, pay more attention to the bones of the house than the paint colors, ugly kitchen cabinets or old carpet in the house. These things are easily changed once you move in, and by doing these cosmetic fixes you can raise the value of your home quickly!
Letting emotions take control: While buying a home can be emotional, you ultimately have to treat it as a business transaction. It is most likely the most amount of money you’ve ever spent, so you want to make sure you are spending it well. If you love a house and are beat out by another buyer, don’t let it upset you. That just means the perfect house is still out there! Also, don’t let the stress of the purchase distract you from the best part of the deal- you are getting a house!!