Tips for Rookie Homebuyers: How to Avoid Common Mistakes

Odds are that you have big dreams for your first new home purchase. Perhaps you envision a large suburban house featuring a backyard with plenty of room for a game of catch. Or maybe you’re looking for a cozy condominium in a tall high-rise. Then again, maybe you crave a hip mid-century ranch house or a multi-story Victorian home nestled under large oak trees.

As fun as it can be to flip through real estate listings and wonder “What if…?,” it’s important to remember that owning a home is a big financial investment, not to mention an incredible commitment of time and energy. In other words, it’s important to keep your eye on the ball.

To avoid costly errors in judgment driven primarily by emotion — or a fantastic eat-in kitchen, it can be helpful to identify common mistakes real estate rookies make and then map out a game plan to sidestep them.

Mistake #1: Not understanding the homebuying process

There are many steps to buying a home, and there can be some variance from buyer to buyer. Generally speaking, however, you can expect to:

1. Work with a mortgage lender to select the mortgage that’s right for you, based upon your planned down payment and potential closing costs.
2. Secure your loan prequalification or preapproval.
3. Select a real estate agent, preferably a knowledgeable professional who understands your targeted neighborhood(s), has strong negotiation and marketing skills and appears dedicated to helping you meet your goals.
4. Research homes and neighborhoods with your agent.
5. Make an offer on a home through your agent.
6. Negotiate with the seller on the price (if necessary); if an agreement is made, choose a closing date and select a title company.
7. Secure a home inspection and home appraisal.
8. Request repairs or credits based on the inspection and/or appraisal.
9. Buy homeowners insurance.
10. Do a final walk-through to confirm that any requested repairs have been made.
11. Close on your new home.

Mistake #2: Trying to buy a home without help

As tempting as it can be to go it alone when buying a home, the truth is that real estate professionals are uniquely prepared to help you get answers to tough questions, stay focused on your goals (and budget!) and connect you to resources and individuals who can help you reach closing day.

Most buyers can anticipate engaging with the following real estate professionals on the road to closing day:

• Real estate agent
• Mortgage loan officer
• Escrow officer

Depending upon your financial situation, your team may also include an attorney, accountant or financial advisor, too.

Mistake #3: Letting your emotions lead

Imagine stepping into a beautiful home during an open house on a sunny Sunday afternoon … and immediately falling in love. Overhearing other buyers talking with the listing agent about the property, you decide to make an offer right away, over and above the asking price — and beyond your budget.

Later, however, you discover that the house and the price point don’t align well with each other or your pocketbook, which leads to disappointment and frustration.

Because homebuying can bring forth strong emotions, it’s helpful to have a real estate agent beside you. They’re helpful sounding boards throughout your realty journey, providing you with insights, analysis and perspectives honed from years of working in the industry.

Together with your mortgage lender, an agent can help you keep on budget, too.

Mistake #4: Skipping the loan prequalification

It’s generally recommended that buyers secure a prequalification or preapproval letter from a mortgage lender prior to reaching out to a real estate agent.

Yet many first-time buyers start the search process by talking with an agent. Since experienced agents are well versed in the homebuying process and typically have contacts with mortgage lending and title companies, that’s arguably an acceptable route to take.

Just remember that a seller is more apt to take you seriously with a prequalification letter. Why? Because it’s a formal assurance from a trustworthy third party that you have the income and/or assets to close the deal.

Without one, you may have a tough time getting any offer accepted.

Mistake #5: Emptying your savings

Although typically a sizable chunk of change, a home’s down payment can prove to be just the tip of the iceberg when it comes to what you’ll spend when purchasing a home. And, if you commit too much of your savings to it, you may find yourself scrambling to pay other costs.

As you gear up for your realty search, consider all other costs associated with buying a home:

• Loan origination fee: Also called a mortgage origination fee, this is what a lender may charge to set up your home loan.
• Escrow account: Your lender may ask that you place money in an escrow account to cover miscellaneous expenses (including mortgage insurance) upfront.
• Earnest money: Spelled out in the contract that both parties sign to indicate a sale will take place, earnest money is the term for funds that the buyer puts up to demonstrate to the seller that they are serious about purchasing the property. Once you’ve closed on the home, the money is returned to you. If, however, you opt to back out of the deal, you cannot get the money back.
• Home appraisal: Useful to both buyers and mortgage lenders, this review of the property by a professional appraiser is done to ensure there are no obvious safety problems or structural issues that could undermine the home’s presumed fair market value.
• Home inspection: A qualified inspector will look at the home’s general condition, identifying items that may need repair. Based on this information, the buyer may try to negotiate for the seller to cover some of the costs identified in the inspection.
• Closing costs: Buyers and sellers typically negotiate who will pay what costs on closing day. Pest inspections, property taxes, homeowners insurance and private mortgage insurance as well as the title search and insurance may be included in closing costs.

Finally, don’t forget essentials related to the setup of a new household such as school taxes, moving expenses, landscaping and even household essentials like appliances, cleaning materials, and so forth.

The takeaway

Buying a home comes with many decisions and lots of emotion, especially if you’re a real estate rookie. If you’re mindful of the process and partner with professionals who understand the industry and your local market, however, you’ll be prepared to knock your first home purchase out of the park.

Whether you’re planning to sell or buy a home soon, remember that Kuper Sotheby’s International Realty — RBFCU’s preferred real estate partner — is here to help you move beyond your expectations to provide an extraordinary real estate experience.

Contact a Kuper Sotheby’s International Realty agent today.

San Antonio: 210-236-6464 | Austin: 512-516-8484

realty@rbfcu.org

Information in this article is general in nature and for your consideration, not as financial advice. Please contact your own financial professionals regarding your specific needs before taking any action based upon this information.

DISCLOSURES

Kuper Realty Holding Company, LLC dba Kuper Sotheby’s International Realty is a subsidiary of RBFCU Services LLC. RBFCU Services LLC is affiliated with Randolph‑Brooks Federal Credit Union (RBFCU).

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