4 Common Mistakes by First Time Homebuyers

Being a new home buyer can be a scary and worrisome experience.  Not only is buying a home a huge decision and investment, it’s also a new world for potential buyers.  New terms, new ideas, and new paradigms all combine to make the experience one that, without a bit of guidance, can become very intimidating.  Being in the market for a new home for the first time doesn’t afford much in the way of experience.  Hopefully, what others have learned can help you not repeat these same four mistakes!

1. Spending the maximum on housing

One mistake comes when lenders qualify buyers based on their incomes and debt-to-income ratios without considering how much the borrowers spend on items such as transportation, savings, food and other necessities.

“A lot of first-time buyers are optimistic about the future and excited about buying a home, so they borrow the absolute maximum they can afford instead of allowing themselves wiggle room for a partial loss of income or for future expenses such as children,” Harrison says.

Financial experts recommend that consumers decide how much they want to spend each month on housing before meeting with a lender.

“Every buyer should create their own budget and know their limits,” says Stephen Adamo, president of Weichert Financial Services in Morris Plains, N.J.

Adamo says many first-time homebuyers experience a sizable change in their housing payments. Some new owners may go from $500 per month in rent to a monthly mortgage payment of $2,000, he says.

“You need to deal with payment shock,” Adamo says.

2. Not getting prequalified early enough

Meeting with a lender for a buyer consultation and prequalification for a mortgage should be the first step toward homeownership. Yet many first-time homebuyers wait until they are ready to start house hunting before contacting a lender.

“It’s never too early to set up a free buyer consultation with a lender,” Adamo says. “Every buyer needs to get prequalified early enough in the process so that they can make some changes if they need to or correct errors on their credit report.”

Some buyers may need to spend up to a year saving more money, increasing their incomes or cleaning up their credit before making an offer on a home.

A buyer consultation should include creating long-term financial goals and strategies for buying property, Adamo says.

3. Misunderstanding the importance of a high credit score

While most consumers know it’s important to have a high credit score, not everyone understands how costly a low score can be.

“All mortgage lending is done with a tier of interest rates and terms based on consumer credit scores,” Harrison says. “A credit score of 720 or above will earn you the best rates and can potentially save you thousands of dollars.”

A score of 680 to 720 can get you good mortgage rates, while a FICO score of 620 is usually about the lowest score to qualify for most loans, Harrison says.

Consumers should learn about credit scores the minute they start working, Harrison says. Many Websites provide information about how to improve your credit score.

Even after a mortgage approval, consumers must avoid applying for new credit or taking on new debt, Adamo says, because a second credit check is now often required before settlement.

4. Choosing the wrong mortgage product

First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgages and adjustable-rate mortgages.

But Harrison says home loan alternatives to a 30-year-fixed sometimes make more sense. For example, buyers certain they will be relocated by their companies within five years may find a 5/1 ARM “could be a much better mortgage,” he says.

“There’s no reason to pay a premium for a product you don’t need like a 30-year loan,” Harrison says.

Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.

Amanda has earned the Accredited Buyer's Representative (ABR®) designation through the National Association of REALTORS® to better assist and negotiate on her buyer clients behalf.  Call her today to help you purchase your home!

www.AmandaParmerSellsHomes.com

Low-Cost Kitchen Redos!

So you've been shopping and shopping and looking at houses and at this point, you can't remember the first house you looked at, right?  We've all been there!  If you're going to the spend the money and commit to buying a house, you want it to be something you love!
But what do you do when one house has the living room and bedroom you love, but another has the kitchen you really want?  You can't just mesh them together, and you don't have time to build it.  How about considering a low cost kitchen redo?  You might get closer to what you really want, and it's relatively inexpensive to "make it yours!"

Kitchens are one of the features buyers compare most closely when they're shopping for a home.  

Replacing cabinet hardware, such as handles, knobs and hinges are a quick, DIY way to enhance kitchen space.  According to HouseLogic.com, an average kitchen is 200 square feet with 30 linear feet of cabinetry, which equates to about 40 handles and knobs.  Averaging between $2 and $20 per knob or pull, you can budget $80-$800 for this enhancement.  *Don't forget to check surplus stores, Habitat for Humanity stores and bargain websites!
Redo-ing your cabinets is like a facelift for your kitchen!  Done right, painting or refinishing the existing cabinets can cost less than $200 and leave you with a brand new kitchen!

Faucets come in every shape, style, color, and theme you could imagine to include a plethora of options for height, spouts, hoses, and folding necks.  Quality faucets start around $200 and can be a quick project that will completely change the look of your kitchen!
How about undercabinet lighting?  LED undercabinet light can have a dramatic effect for about $40.  But if you're in the lighting aisle at Lowe's, check out your other options- different types of light cast different shades and can transform your kitchen.

Typically, buyers will choose functionality over elaborate decoration.  Practical storage in the kitchen will go a long way.  Over-the door hooks, baskets in the pantry, slide shelves in the cabinets, drawer organizers, wine racks and wall hooks for pots and pans will add appeal, usually for less than $100.
Granite countertops are not always a necessary upgrade!  Laminate can mimic the contemporary look of granite at a significant discount.  On average, the cost for 30 linear feet of laminate countertop is around $1,575; the same space in granite would be close to $2,500.

If you're interested in buying or selling, I would love to talk to you about your options.  And if you would like more cheap DIY ideas to enhance the look of your home, give me a call!  I would love to chat with you about it over coffee!  I LOVE projects!