Take Advantage of Low Home Loan Interest-Rates, but Don't Make These Common First Time Homebuyer Mistakes

Zachary Walston

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It's a great time to buy your first home. Record low-interest rates have made homeownership more affordable than it has been in years, so right now it is a great time to get out of a rental and into a home of your own. In fact, the majority of my buyers over the last few months were purchasing a home for the very first time.

Unfortunately, there are a couple of traps that are really easy to fall into as a first-time home buyer if you’re not careful.

Lindsay Walston, an Atlanta real estate agent, recently shared with me the most common mistakes she sees first-time homebuyers make.

#1 - Not knowing how much house you can afford

When you get your pre-approval letter, the lender will tell you how much they think you can afford. The key word is 'think.'

You need to consider what that monthly payment will mean for your finances. It is important to make a budget and stick to it before you start shopping. Just because you can technically afford the payment, doesn’t mean you should max out your budget. - Lindsay Walston

You should consider a couple of different things when buying a home aside from just the monthly payment. How much is the house going to cost to keep up? What other monthly expenses will you incur? What do you want your lifestyle to look like after you buy your first home?

Maxing out your budget will likely mean you’ll have to make concessions elsewhere from a lifestyle perspective. It’s not that you can’t do it, just make sure you go into it with eyes wide open.

#2 - Only talking to one lender

This could potentially be one of the costliest mistakes you could make.

Did you know that you can (and should) price shop a home mortgage just like any other good or service? There can be huge differences in interest rates, fees, and experience between lenders that could potentially cost you tens of thousands of dollars over the life of the loan. - Lindsay Walston

You should compare interest rates, but also closing costs and other fees attached to the mortgage itself. You’ll be surprised at how much costs can vary from lender to lender, but you won’t know until you shop around a bit. Keep in mind, all mortgage applications made within a 45-day window count as a single credit inquiry.

#3 Not doing your research

Your real estate agent should be knowledgeable about the area in which you are searching and guide you in the right direction to make the best decisions for your individual situation. It is still important, however, that you educate yourself on the housing market in the area you are searching.

Before you start visiting homes with an agent, do your research on your target area and price range and take a look at current homes on the market can help you figure out exactly how far your budget will go. Determine if your budget matches your desired area and “must-haves” list. It is frustrating to have one expectation of what your budget will get you, only to be completely disappointed when you actually start your search.

If your budget and area don’t match, knowing in advance can help head off those frustrations and a great agent can show you how to maximize your budget while still getting as many things on your “must-have” list as possible, whether that is shifting your search area or looking at properties that might require a bit of elbow grease.

#4 - Waiting for the “perfect” house to start looking

If I had a dollar for every buyer that told me that they were waiting to find the “perfect” house to officially start the house shopping process, well, I probably wouldn’t have to be taking anyone house shopping anymore. - Lindsay Walston

If you’re waiting until you’ve found the perfect house to start the home buying process, you’re probably too late, especially in this market. Now, more than ever, it’s important to have everything in line in advance of finding that dream house because most homes that are priced well and in a desirable location will go under contract within 24-48 hours.

Don’t rely on pictures to decide if a home is your dream home or not. Photographs can be deceptive and more often than not, don’t show the whole picture. Fish lens and listing photos that conveniently leave off a highly undesirable home feature or awkward layout can be deceiving. There are plenty of great homes with horrible listing photos. These are often the best deals.

#5 - Thinking you have to have it all figured out

Aside from creating the budget and determining a target area, you don’t have to determine every other detail before starting your search. You should know what type of home you want (single-family, townhome, condo, etc.) and a rough idea of size (number of bedrooms and bathrooms), the details can be ironed out during your search, and they will likely change a bit anyways.

As you look at homes you will find you will get much better at determining your highest priorities that you are looking for in a home, and they may not be what you expected. You may also find specific features of a home that may become complete deal-breakers that you never thought of until you started looking.

#6 - Falling into the HGTV trap

Don’t get me wrong, I love me some Fixer Upper but if I’m going to be completely honest here, home renovation shows have done a lot to set some really unrealistic expectations on rehabbing homes. The “worst house in the best neighborhood” is a bit of a unicorn and would probably have been snapped up by an all-cash investor before you had the opportunity to see it. Buying a fixer-upper has been made to seem really glamourous. - Lindsay Walston

While buying fixers can be a great way to build equity and maybe even turn a profit at some point, it is not for everyone. It is really hard work (Lindsay shared her experience with her first home in Atlanta) and if you don’t have experience in home projects there are many things that are best left to the professionals.

If you’re hiring someone to do the work for you, know that it’s not as easy, fast, or as cheap as it’s made to look on TV. If you’re considering buying a fixer-upper and want to have work done, get all of it priced out by multiple contractors during your due diligence period.

You don’t want to be stuck with a project home you can’t afford to fix.

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I am a physical therapist, researcher, and educator whose mission is to challenge health misinformation. You will find articles about health, fitness, medical care, psychology, and professional development on my site. As the husband of a real estate agent, you will also find real estate and housing tips.

Atlanta, GA
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