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Cover story: Mistakes first-timer buyers can avoid
Question of the Day
First-time homebuyers tend to have the same goals: ownership of a home they love, that meets their needs and that they can afford. While it’s hoped that first-time buyers end up satisfied with their first experience in the real estate market, it’s sometimes inevitable that mistakes are made.
Potential first-time buyers can learn from the mistakes of buyers who have gone before them to ensure a smooth transaction of their own.
- Not working with professionals
“The two worst mistakes a buyer can make, mistakes that, in turn, lead to other mistakes, [are] not choosing a Realtor to work with and not working with a lender to get pre-approved for a mortgage loan,” says Peggy Parker, an associate broker with Keller Williams Realty in Alexandria, Va.
Ms. Parker says buyers often don’t understand the importance of having a Realtor represent their interests.
“First, most people don’t realize that the Realtor is paid by the seller at the settlement table, not by the buyer,” Ms. Parker says. “Buyers also sometimes don’t understand that a real estate agent can show them every property, including for-sale-by-owner properties. Realtors can really help buyers save time and money by showing them all the possibilities in their price range that meet their needs.”
Jerry Thatcher, a Realtor with Weichert, Realtors, in Fair Oaks, Va., says the worst mistake buyers can make is to start looking for a home without meeting with a lender.
“Buyers who have yet to meet with a lender have no knowledge of their buying power and no foundation they can use to narrow down their search for a home,” Mrs. Thatcher says.
Brandon Green, principal broker of the Brandon Green Team at Keller Williams Realty in the District, says even buyers who have met with one or more lenders sometimes make the mistake of not locking in a loan rate before their contract is ratified.
“Buyers hope that they will get a lower interest rate if they wait until after they have a signed contract, but it is just as common to have interest rates rise or even a loan product disappear between the time they meet with a lender and have a signed contract,” Mr. Green says. “I recommend that all buyers be decisive when it comes to choosing a loan. Time is not always on your side, and you can lose out on the home you want to buy if you are not careful.”
- Not being financially prepared for homeownership
Joanne Darling, broker-owner of Darling Real Estate Co. in Greenbelt, Md., says first-time buyers often are unprepared financially for buying a home, especially when they have not met with a lender.
“Buyers often have no sense of how much they can afford to pay and no idea of how much cash they need to buy a home,” Ms. Darling says. “There’s nothing worse than discovering that you can’t afford to buy the home you love.”
Ms. Parker says buyers can find out how much they need for a down payment and closing costs at the first meeting with a lender. In addition, buyers need to have cash reserves to pay for home maintenance and unexpected home repairs.
While a lender can qualify buyers for a mortgage, it is up to the buyers to decide how much they are comfortable spending on housing payments. A home loan qualification depends on the credit scores of the borrowers and their debt-to-income ratios on minimum monthly payments, but the lender cannot know about borrowers’ other financial goals or needs. Homebuyers need to develop their own budget, based on their current and anticipated spending patterns.
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