8 Common Mistakes First-Time Homebuyers Should Avoid Making

real estate agent

First Time Homebuyer Mistakes

Many first-time homeowners don’t know what to expect. Many people make mistakes that can ultimately prevent them from getting the house that they really want. Here are some mistakes that first-time homebuyers might make, and should try to avoid.

Not being prepared for an all-cash market

As markets heat up, buyers should be ready to make quick decisions. One of the most important things to do, before even starting your search, is to save as much money as possible for a down payment. Look at your credit report and clean up any blemishes and get a pre-approval for a loan. Impatience is never a good thing. While you might be excited to jump right into the process, everything will be easier if you start slow and prepare.

Don’t assess their debt

One of the first things that the lender looks at when assessing how you’ll be able to afford mortgage payments is your debt-to-income ratio. It’s easier to own a home if you can show a history low debt and show saving habits.

Bringing the wrong emotions

Sellers will choose to sell their home to someone who really loves it. What buyers don’t realize is that from the moment they enter the home, they are probably being interviewed. Complaining the whole time or picking on things in the home can make a bad first impression. If you keep seeing red flags, try renegotiating your deal. If you find a house in a great location, try to figure out if the issue is a quick fix that you can do after the purchase.

Lacking vision

If you can’t afford to replace the wallpaper in the bathroom now, it might be worth it just to live with it until you can afford to pay it back, especially if you’re getting a house you can afford and that you want. Remember that not everything in a home is forever. If the home fits your criteria for things that can’t change, like location, or are difficult to change, like size, don’t let other imperfections turn you away.

Compromising on important things

If you know you’re going to have kids and want three bedrooms, don’t buy a home with only two bedrooms. Don’t buy a condo just because it’s cheaper. You will probably have to make some compromises on your first home, don’t make ones that will make your life harder in the future.

Not thinking about the future

What is the future going to be like for your property? Are there development plans in the works for your neighborhood? Is your street a major street or a popular shortcut? What are the zoning laws in your area? What is going to be built on undeveloped land? These are all questions you should definitely ask yourself before purchasing a home.

Skipping the home inspection

On average, a home inspection costs around $450, but can vary depending on the home’s size and how it was built. Not only does the inspection let the buyer know what shape the home is in, but it also gives the buyer insight into how to maintain the home. Inspections are one of the most important parts of home buying. Buyers should inspect basements, attics, and mechanical rooms as well as ask about areas that can cause problems for the foundation. The one time cost of a home inspection saves you a lot more money in the long run.

Failing to consider addition expenses

Many first time buyers forget about additional expenses that are not a part of their monthly payments. When purchasing a house, you are responsible for paying property taxes, as well as making any repairs your house need and protecting your home against any natural disasters.

Make sure you consider and cover all your bases as a first-time homebuyer to make the process a success.

What NOT to Say During the Home Buying Process

what-not-to-say-during-the-home-buying-process

What Not to Say as a Homebuyer

As a buyer, there are always things going through your mind as you walk through a house that could possibly become yours. However, there are some things that you should keep to yourself.

1. “I love it! This is my dream house!”

By saying this, you are giving the seller unnecessary leverage. Telling the seller that you love the house or that it is your dream house takes away your negotiating position. Keep this to yourself and your agent.

2. “That (insert furniture/paint color/another household object here) is ugly.”

Not everyone’s style is the same, so don’t bad mouth a style that might not be the same as yours. If a seller hears you, they may be inclined to go with another buyer. Besides, the couch isn’t nailed down! The seller might be taking it with them when they move, and if not, you can always get rid of it. There’s no need to criticize something that can be very easily remedied.

3. “I can’t wait to get rid of that.”

This is very similar to number two. A seller can reject an offer or come back asking for more money if they hear that you want to totally remodel their home. Wait until you’re back at your home to start talking about things you may want to change if you end up purchasing the home.

4. “Why are you selling?”

This could be a very touchy subject. You never know, or need to know, why the seller is selling. Whether it be for a job or more personal reasons, why the seller is moving doesn’t affect you or your possible purchase.

5. “I can afford to spend xxx.”

How much you are able to spend should be kept between you and your agent. If a seller or seller’s agent hears anything concerning about your ability to pay a full-price offer, this can hinder your ability to negotiate for a fair price.

6. “You’ll never get that price.”

Odds are the seller has done research to appropriately price the home. Even if you think the house is more on the expensive side, it is possible that it’s within the range of comparable prices for the neighborhood.

7. “I’ll give you (an extremely low offer).”

Always make sure to consult your agent when it comes to pricing. Giving an extremely low offer for a home can not only be insulting to the seller but can also make it seem as though you are not a serious buyer.

How to Manage Stress When House Hunting

home buying stress management

A Few Quick Tips on Avoiding Stress When Buying a Home

Buying a home can be a stressful process. Here are some things you can do ahead of time (and during the process) that may help make buying your home a less stressful – or more enjoyable – experience.

  1. Start as soon as possible

Feeling rushed is a huge cause of stress. To reduce stress, ensure you have enough time to explore all your options. You want to look at a variety of properties to get a full understanding of the market. If need be, you may be able to break the lease on your current apartment, or if your move-out date is approaching, rent out a new apartment for a couple of months.

  1. Decide what you want

Going into the home buying process knowing what you want in your home not only saves time but keeps the stress away, too. Being as specific as possible helps! It’s good to know in advance what you consider to be essential and what you consider to be a deal-breaker. If you know what you don’t want in a house, you won’t waste time exploring a home that isn’t worth it!

  1. Stay organized

Keep any paperwork you have in an organized fashion, however you do it. It’s best to visit the bank early, and if you can, get pre-approved. While making your budget, make sure to take into consideration all costs, including relocation and renovation. A pre-approval shows sellers that you are serious about the home-buying process, and can give you a leg up if more than one person puts a bid on a home you want.

  1. Keep thorough records

You always want to remember which house had what features. Take a lot of notes during each viewing so that you can easily compare houses later. In addition, make sure to ask the seller’s agent if you can take pictures of the home. Pictures help you remember all the little details.

  1. Plan your viewings

If you can, schedule your viewings in a block of a few days, so that you can easily track how you felt about each one. In addition, booking a viewing on a weekday is a good idea if you can swing it. There will be fewer visitors, which in turn means that the agents will have more time to dedicate to each buyer.

  1. Don’t get attached

It’s easy to fall in love with a house the second you walk through the door, but try not to! It might be hard not to envision where all your furniture will go, but there is always the chance that someone will buy the house before you do, or that the seller might not accept your offer. Nothing is worse than getting your heart set on something only to find out that you can’t get it!

Above all else, there will always be the traditional stress relief activities also. So, take a deep breath, go for a walk, do whatever helps you calm down in any other stressful situation.

Pros and Cons of an Open House

open house

What’s an open house?

Open houses are a way to bring in potential buyers to your home. There can be several open houses on any given day, so you want to make sure your home stands out among the others. Make sure it’s clean, and the outside is polished.

Here are some of the pros and cons to having an open house.

PROS

Attract First Time Buyers

  • Open houses tend to attract those who are just starting out in the home buying process.
  • Open houses open your home to more buyers in the market.

Additional Exposure

  • The chance of selling a home without maximum exposure and a strong marketing system is greatly reduced.
  • In general, open houses can give additional exposure to a seller’s home, whether it be through street signs, newspaper ads, or internet ads. More exposure increases the odds of the right buyer seeing your home.

No Pressure

  • Open houses are laid back events, allowing the buyer’s to tour the home with little to no pressure.
  • Open houses give buyers the option to view a home without the added pressure of a realtor or seller, and allows them to analyze a home in detail without having a time constraint.

CONS

Small chance of a sale

  • The majority of homes are sold when a buyer has a private showing. The percentage of homes that sell as a result of an open house is less than 2-3%.
  • Open houses tend to bring unqualified buyers.

Security Issues

  • Break-ins and vandalism are unfortunate possibilities with an open house, especially if you’re selling a vacant home.
  • Before an open house, make sure to remove all valuable items. The possibility of theft is heightened during an open house since possible buyers are allowed to walk through the house at their leisure.

Open houses are not necessary for the sale of a home. Carefully weigh the pros and cons of an open house before bringing the public into your home.

The Buyer-Agent Relationship

real estate agentWhat does a buyer’s agent do?

An agent usually works with a buyer for a few weeks to several months, or longer. Agents:

  1. Introduce buyers to lenders and obtain pre-approval letters
  2. Email listings that fit the buyer’s requirements
  3. Call listing agents to determine availability
  4. Make appointments with seller before they show homes
  5. Drive the buyer from one neighborhood to the next

Finding a buyer’s agent

A common way to find an agent is through referrals by family, friends, or co-workers. However, if you are going somewhere new or no one can offer a referral, you can find agents through:

  1. Internet searches: When looking online, run keyword searches to narrow down your results. You can also look at websites like realtor.com. These types of websites have listings of profiles from agents all across the nation.
  2. Open houses: When at an open house, the agent hosting it may or may not be the listing agent. All you have to do it ask. Open houses are a great opportunity to talk to the agent and learn more about them. You can ask for a business card and look up their website later when doing a little recon.

Should you sign an exclusive agreement?

The words “exclusive agreement” may be nerve-wracking to some. However, there are a few things that you can do to make this process a little less daunting.

  1. Ask for a shorter term. Many agents might request a 90-day term. You are free to ask for a 30-day term, or whatever you can negotiate.
  2. Request a non-exclusive agreement. This may seem a little redundant for an exclusive agreement. What this means is if you decide to switch agents mid-way through your home search but end up buying a home that your first agent showed you, your first agent gets compensation. With this, both parties are protected: the agent is protected by establishing a procuring cause and you are free to pursue any opportunities that come your way.
  3. Grab a Cup of Coffee. If you don’t know how you’ll work with an agent, suggest getting to know each other first before signing an exclusive agreement. That way, you get to know the agent a little better and can see if you’ll work well together. Afterwards, if you believe the working relationship will be conducive, you can sign the agreement with a little more confidence.
  4. Specify areas and terms. If you’re unsure about where you want to move, specify certain terms in your contract. For example, you can specify a price range and a neighborhood for a certain agent. If you decide at a later point to search outside of those restraints, you can choose a different agent to show you those new locations.

Signing an agreement is not necessary. You should wait until you’re totally comfortable with your agent if you decide to go ahead and sign an agreement. Make sure you know all the terms and that they will work for you through each step of the buying process.

Pre-Approval vs Pre-Qualification

pre-approval vs pre-qualification

What’s the difference between pre-approval and pre-qualification?

Understanding Your Pre-approval

A pre-approved mortgage is a step in the mortgage buying process that can certainly help during the housing selection stage. A mortgage pre-approval is given by a mortgage lender, which states you are already approved for a mortgage even before honing in on a property. The process to get pre-approved requires you to fill out a loan application and provide the lender with income, asset, and any other specifically identified documentation necessary for the pre-approval. The lender will then pull your credit report to determine your creditworthiness. This will be the same process as a traditional mortgage application. Once you are pre-approved, you will be notified of the pre-approval and the amount of money you can borrow.

One of the biggest advantages of being pre-approved is knowing your budget ahead of time. You will be able to know exactly how much you are able to borrow. This allows you to weed out the houses that you know you won’t be able to afford, or even consider houses that might have seemed out of reach before.

In addition to knowing your budget and being able to narrow down your search that way, you also have a leg up over the people who are not pre-approved. Since you are pre-approved, you have much more negotiating power than someone who is not pre-approved. If you make an offer on a property, your offer will be placed in priority of others, even if the other offers are higher. Why? Because your offer has already been pre-approved and had your credit report and personal information reviewed by a lender.

Pre-approval vs Pre-qualification

Pre-approval is not the same thing as a pre-qualification. Pre-qualification is the first step in the mortgage process. During this step, you are giving a bank or lender an overall financial picture. This includes your income, assets, and debt. After evaluating your situation, the lender can give you an idea of what you qualify for. However, this is not a guarantee! This quick process is in place just to give you information on what you might expect if you get pre-approved.

Pre-approval can greatly help you on your home journey. Not only can it help you time-wise, letting you cut out houses that you know you won’t be able to afford, but it’ll help even more once you find the perfect house for you, putting your offer on top of the others.

 

Starter Homes & What to Know

starter homeWhat’s considered a starter home?

A starter home is a small home or condo that you can afford now, with or without making improvements. When you purchase a smaller home, a mortgage is generally much more manageable and affordable, which prevents the need to make several adjustments to your current lifestyle.

There are many benefits to purchasing a starter home before getting a forever home. If you are in a volatile industry, it may be better to purchase a starter home rather than a permanent one. This may be especially relevant if you work on a contract. In addition, if you want to rent out your starter home once you find your forever home, purchasing a starter home first may be the first step in that process.

When looking for a starter home, keep the following things in mind.

  1. Look for a loan first, then for the house

Make sure that you look for a loan before you start looking for a house. By knowing what you can afford in the beginning, you don’t have to run the risk of your eyes being bigger than your wallet. Even if you can afford a bigger home, it’s smart to have your financing already in place. It’s not uncommon to see deals fall apart because of delays in obtaining a home loan.

  1. Make sure you have a plan for selling the home

Always go into a home investment with a long-term plan. If you know that this home is going to be a starter home, go into it knowing approximately how long you want to be living in the home, and whether you’ll sell it when you’re ready to move or keep it as a rental property.

  1. Don’t ignore the inspector’s report

If problems arise on the inspection report, don’t ignore them! If you notice potential expenses that will surface in the near future, negotiate the price further down to make up for those projected expenses. If the seller isn’t willing to negotiate, walk away and find another home.

  1. Don’t overlook the other financials

The purchase price of your home isn’t the only cost that you have to consider. Additional expenses such as closing costs should also be considered. In addition to those costs, you should allot resources for potential repairs that you may have to make.

  1. Don’t buy too big

You may be tempted to buy the best starter home your money can get you. People often buy the most expensive home they can afford, even if it’s not the home that they want. However, this can leave you cash poor, and because of this, your finances and credit can suffer. In turn, your credit score can drop and future lenders might see you as a risk when ready for your next mortgage.

Buying a starter home isn’t necessary, but it can be a helpful step in the home buying process.

Recent Grads & Mortgages

recent grads and mortgagesA few recent college grads looking to purchase a home reached out to us with some questions. Here’s what our CEO, Justin DeJoseph, had to say.

“My husband and I both recently graduated from college but we’re concerned it’s too soon to look into a buying a home. Can recent grads get approved?”

Yes college grads are 100% eligible for home loans, the things that play a large part in the approval process is the type of job and the income. As long as you receive a base salary we can qualify you off that income with as little as one month’s earnings. If you’ve been working less than two years since graduating, you’ll most likely be asked to provide college transcripts with dates to prove that you went to college.

“Is $60,000-$70,000 per year of combined income enough to sustain a mortgage without worrying?”

Of course it is – however it comes down to the purchase price of your home along with the property taxes and your ongoing monthly debt obligations. There are certainly some things to take into consideration. For example, if it’s a condo you should factor in the monthly HOA (Home Owners Association) fees to be sure you can afford the total monthly payment.

“How much do we need saved up for a down payment?”

All you need is as little as 1% down payment if you meet the 1st time homebuyer requirements. We can also do 3%, 3.5%, 5% with competitive rate options that are similar to putting down 20%.

Exactly why is it better to own than pay rent?”

If you own your home it’s not unlikely that you’ll be paying a mortgage payment similar to your monthly rent. Even if it’s slightly higher you have added benefits. When you own your home you have the ability to write off property taxes paid along with the interest you paid on the mortgage for the year. These write offs will help you save on the amount of federal and state taxes you pay.

“So it’s really possible to own my own home?”

Yes, as long as your credit is above average and all payments are paid on time with no defaults, and you’ve had no late payments in the past two years. While these are only a few of the qualifying factors, they’re the big ones we look out for at Garden State Home Loans.