First-Time Home Buyer Mistakes

There are a lot of firsts in life. You remember your first kiss, first car, and first love. Your first home is no different. As many of you know with firsts, there’s always something that tends to go wrong. We’ve all heard the horror story how someone’s first kiss resulted in locked braces. Make the memory of buying your first home a happy one by following these tips.

It’s easy to get wrapped up in a ‘buy now’ mentality that the excitement of house shopping brings. In Minnesota where the housing inventory is low, competition amongst buyers is fierce.

Homeownership has benefits, but not when you overextend your budget.
Homeownership has benefits, but not when you overextend your budget.

“As inventory continues to decrease, prices will continue to go up,” said Jim Cormier, President of the Minnesota Association of REALTORS®. “We are seeing more multiple offers on homes for sale in Minnesota and many buyers are starting to put their offers in very quickly to avoid losing out on a property they want to buy.”

The pressures to buy in this economy are numerous. In addition to this competition, there are social and health benefits to a stable home as compared to renting.  A steady home provides security and routine, allowing for lower child unintentional injury rates, higher self-esteem and lower levels of distress, and more positive mental health, which is associated with lower blood pressure. Overall well-being for a person improves from renting to owning a home. There are things to consider before making the plunge. Don’t buy when…

You’re planning on moving again soon.
Homeownership is preferable to renting. You earn no home equity when you write those rent checks. If the location isn’t more of a permanent one however, it’s not worth the purchase even with the home equity benefits.

“Some people tend to buy a house knowing that they’re going to be relocating after a few years,” says LearnVest Planning Services certified financial planner Ellen Derrick. “Don’t buy property and automatically assume that you’ll be able to rent it out or sell it when you move.”

You’re purchasing past your means.
Add $10,000  here or $15,000 there. That’s really not a big deal when purchasing a house right? It is, especially when it’s stretching towards the upper end of your budget. What if you lose your job? What if there is a financial emergency? Get pre-approved for a mortgage so you have an idea of your upper limit. Then, take that number and take 20 percent off. That is your new limit.

If you can’t afford the added costs.
Rentals have the advantage that usually the utilities are included in your monthly payment. That changes with homeownership. Add property taxes and the actual monthly payment may be out of your price range. Get quotes and estimates before signing the dotted line. Budget one percent of the home’s purchase price for annual maintenance. Then you will be able to truly tell if the house will be more pain than it’s worth!

Don’t let these aspects stop you from fulfilling the American Dream of homeownership. It still is the primary long-term strategy to build wealth in the United States. Overall health of homeowners compared to renters is better in almost all aspects, mental and physical. Children of homeowners are even more likely to graduate from high school. The key is choosing a home that fits your needs and is within your price range.

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