It’s no secret that buying a home is a huge financial commitment. But if you’re not careful, you could end up making some costly mistakes that will set you back for years.
A lot of young homeowners still make financial decisions that they regret later on. In one survey, nearly two-thirds of all millennial homeowners have home-buying regrets. This generation of home buyers is far more likely to have home-buying regrets compared to their predecessors.
In this article, we’ll take a look at some of the biggest financial mistakes young homebuyers make and how to avoid them. Read on to learn more!
Mistake #1: Not shopping around for financing
When most buyers decide it is time to purchase a new home, they automatically assume they’ll be going with a traditional 30-year fixed-rate mortgage.
However, there are actually a lot of different financing options out there that young buyers should consider. In general, you should research financing options before making a final loan decision. Here’s what to consider:
Time period: A lot of loans only last for 15 or 20 years. If you can afford it though, you might want to go with 30-years instead so the monthly payments are lower and your total finance cost is less.
Interest rates: The best mortgages have fixed interest rates over an extended period (i.e., 5%, 10%, 15-years). You do run the risk of rising interest rates if you choose a fixed-rate mortgage that is only for 5 or 10 years.
Fees: It’s best to avoid costly upfront fees on your loan. However, you should expect to pay closing costs for buying a home so factor those in when choosing the right financing option for you.
Mistake #2: Not shopping around for real estate agents
You might be really excited about finding your dream house but don’t rush into signing with an agent before you do some serious research first. Here are some questions to ask yourself before hiring an agent:
Are they experienced? Look at examples of past work that the realtor has done. Are they familiar with homes similar to the one you’re eyeing?
Are they available? Make sure your realtor is easily reachable. You need to be able to get in touch with them quickly if you have any questions or issues arise during the buying process.
What are their best qualities? Find out what makes this agent unique and why others would recommend working with them.
Mistake #3: Not understanding the fine print
It’s easy for homebuyers to find themselves overwhelmed by all the paperwork that comes along with purchasing a house. That’s why it’s extremely important that you take each document seriously and fully understand everything before signing on the dotted line.
Repayment terms, for example, may allow you to pay off your loan early but you’ll have to pay a penalty if you do. Also, be sure to factor in any taxes associated with refinancing your home.
On the other hand, if something unexpected happens (i.e., job loss, divorce) and you cannot make the monthly payments on time, there are ways for lenders to forgive or delay your fee or penalty for not making payments on time. Be sure to ask about what options are available to you before signing any forms.
Be sure that all of your questions are answered before signing anything! If there’s anything that’s unclear or seems fishy, don’t sign the document until it is properly explained or amended.
Mistake #4: Not keeping track of your loan
So you’ve finally accepted a great offer on a brand-new home and had the closing date set. However, many first-time homebuyers lose track of their mortgage during this time, leaving them vulnerable to defaulting on payments.
To avoid these problems, be sure that you know how much money is due each month and what day it’s expected. If any changes happen (i.e., refinancing), keep documentation as proof that the dates have been changed or payments adjusted accordingly. It can be extremely confusing but it will save you from losing sleep over missed payment dates that could result in costly fees and penalties.
Mistake #5: Shopping for homes alone
Even though it’s exciting to see all the homes you like, this is one time when you should never shop alone. It can be incredibly difficult for buyers to make good decisions on their own due to the high costs involved in buying a house; especially if you’re looking at luxury properties.
Buying a home is one of the biggest investments you’ll ever make, so it’s important to be prepared. Although there are many mistakes that people can make when purchasing their first home, following these 5 tips will help keep you on track and avoid expensive pitfalls down the road.