No, your dad doesn’t know everything:
My biggest mistakes as a first-time homebuyer
Resources — Tatiana Vitas
America doesn’t make it easy to afford a home; working for years only to save up for the downpayment, keeping your credit score in good standing, showing enough income to get approved for a mortgage - all this can definitely seem daunting for something that should be a new and exciting chapter in our lives. Don’t get me wrong, the process of searching for a house is filled with thrill and happiness, but it also comes with a whole rollercoaster ride of emotions when things start going left.
Mistakes are bound to happen if you are not educated on the home-buying process. No, your dad doesn’t know everything. No, your mom doesn’t know a ‘good mortgage guy’. No, you shouldn’t skip the home inspection. No, you shouldn’t wait until the last minute to get approved for a mortgage. And no, you shouldn’t know less than your realtor.
Let’s get into it. These are my biggest tips as a first-time homebuyer plus some mistakes you should avoid if you want to be prepared and have the process run smoothly.
1.The mistake of not doing your research.
Back when everyone from New York was flooding Florida, the housing market went wild, with skyrocketing prices, lines around the block at open houses, bidding wars, shady deals…you name it. Trying to find a house was a complete nightmare; especially while we were renting, and the building was raising our rent by more than double what it was. We were living in Midtown, Miami at the time when rents were going from a nice $2,200 for a solid 2-bedroom corner unit, jacked up to $3,700… within ONE year. But this isn’t anything new to your ears. Many areas of South Florida were seeing crazy inflated numbers.
Not being educated on the comps (real estate comparables) in the neighborhood you are searching in is a huge mistake. Comps are used to determine the value of a home by comparing it to similar properties sold in the same neighborhood or in an area as close as possible to the house being valued.
Yes, this may be your realtor’s job to find you the best deal, but it is also your job to ask and learn! This is actually a mistake we avoided because I am a research fanatic. Any area we were searching in, I was looking at the prices at other homes nearby. I was looking at how much they increased or decreased…etc. You get the idea.
You have to know what you are spending, what you’ll make back if you decide to sell, whether you are overpaying, etc. All these things matter. Nobody smart goes in blind when they buy a home.
2. Start the approval process EARLY
Shopping for a home before getting initial approval; aka. pre-approval – can be a big mistake We did this step early on. We had to! You can’t shop around if you don’t know what you are approved for. Criteria and requirements vary depending on the type of mortgage you qualify for. Getting approved is the most accurate way to determine what you can afford.
By getting that initial approval through a mortgage lender, you know you have a reliable place range to play with. Plus, you appear as a more serious buyer to sellers, which gives you an advantage in bidding war against someone who is less prepared. You are able to act quickly on an offer when you see a home you love and negotiate with confidence.
3. Do not stop at one mortgage quote. Shop around.
This is where we went wrong…so wrong. As first-time homebuyers we were under the impression that we needed a large amount of savings or a better income than what we showed to qualify for a decent mortgage. The first quote we got, we jumped on. We were led to believe that due to our situation (not showing consistent income for 2 years since we’ve only been living here for 1 year, our credit wasn’t in tip-top shape due to incidents caused by Covid and so forth), we wouldn’t qualify for many types of mortgages. It was so disheartening, so as soon as someone approved us, we attacked it like flies on you know what.
The quote we received was from ‘a good mortgage guy’ a friend of ours recommended. For someone who does their research, I truly cannot tell you why I did not follow up with a few more lenders. Of course, a volatile interest-rate environment complicates the situation, but purchasing a home isn’t just about the economic trend. It’s crucial to find a home and shop for a loan when and if it suits your financial and life situation. And the situation we were in, most definitely felt rushed. Maybe it was my nerves about being in such a time constraint with the rising rent prices. I didn’t want to be caught up paying $3,000 and change for an apartment, where I had the funds to put that towards a mortgage. To make matters more irritating, we were dealing with a lender based in New York; because of this, the process went on for much longer than the usual time frame here in South Florida.
Long story short, we ended up paying way more than we should have with this lender (they were asking for all types of stuff when it came to the homeowner’s insurance - things that didn’t even make sense in the location that we bought). At the end of the day, you have to do your research and shop around for quotes. There is always someone out there ready to approve you, regardless of your financial situation.
4. Do not skip the home inspection
People trust their parents - yes I get it. But when it comes to homes, just because your dad owns his home, doesn’t mean he knows every single thing about a home. Home inspectors are home inspectors and your dad is your dad. An inspector works for you and he is there to help you. He knows what electrical panels are up to code, what will help you with insurance, what will disqualify you from even getting insurance, and so forth. Do not be that couple bringing your parents along on the inspection. If they want to see your first home, schedule a second follow-up visit or have them roll up when the inspector has done his job.
Fortunately for us, we are home inspectors; so we saved a couple of bucks on that. A quality home inspection reveals critical information about the property; its condition and its systems. The buyer will learn about what costs, repairs, and maintenance the home may need; and if the buyer isn’t comfortable with the findings, the inspections provide a way for them to back out of the offer.
In short, a home inspection protects your investment.
5. Waiting too long to make your offer
I know you want to play a psychological game when it comes to putting in an offer; you may not want to rush and seem too excited, where the seller tries to ask for more money….there are so many ways things can go. A knowledgeable realtor will know how to play this game. The only thing that you should do is if you want the house, make the offer. Let your realtor handle the rest.
We knew better in such a hostile market than to wait too long. We booked a tour, went home, decided this was our best bet in such a hectic time, and we put the offer in; within 1 hour. Yes, the seller’s realtor came back with a slightly higher number, and yes we knew that would happen, but the number did not exceed what we were willing to offer. We accepted the deal and a couple of weeks later, we now own our first home here in Florida.
Patience is a virtue, but when it comes to the real estate market, you have to go after what you want. Do not wait days to make an offer. The same way you feel about this home, there will be someone else out there who loves it slightly more.
6. Make sure you know your realtor
My biggest, biggest piece of advice is to work with a realtor that you know. Do not go with any realtor. You need to have someone who has your back and who knows what they are doing. Our mistake was dealing with the seller’s realtor and not having our own. We found the listing on Zillow and quickly messaged the realtor. We should have used a realtor we were friendly with to set up the meeting. The seller’s realtor was not working for us, due to the fact he left out some details about the neighborhood that we should have been aware of (but again, we should have asked more questions). He wanted to make the deal go through because the commission wasn’t being split, and he would make out with a nice paycheck on this deal. That was also probably the only thing going for us when it came to our negotiation.
A solid realtor on your team will negotiate the best deal for you. They took an oath to do so. They guide you with an unbiased eye and offer their objective opinion. Working with a realtor also gives you expanded search power on homes you would not find on your own. A realtor is your go-to person in this entire process if you are new to buying a home
The Takeaway
Buying a home can be both exciting and stressful. With so much involved, it’s easy to get a little lost along the way – but when you’re about to make one of the biggest financial investments of your life, those small mistakes can quickly cost you.
Fortunately, with articles like this one, you can avoid mistakes and learn from others. Just ask other people you know who have bought a home. There is always a story!