You did it—you saved for a down payment and closing costs, worked on your credit score, determined how much house you can afford, got pre-approved, and became a first time homebuyer. We’re exhausted just listing all you’ve accomplished! You should be proud of yourself—very proud of yourself.
Pat yourself on the back, but don’t throw away the good, responsible habits that you used to save up to buy a home. You want to protect the real estate investment you’ve worked so hard for by avoiding common homebuyer mistakes…particularly within the first year.
Though this list isn’t exhaustive, it does contain the most common mistakes and how to avoid them—which is essential when buying a house.
1. Purchasing Too Much Too Soon
Your first time homebuyer expenses don’t stop once escrow closes. This is especially true if you’re transitioning from an apartment to your first single-family home.
You’ve got your monthly mortgage payment, HOA dues, property taxes, and private mortgage insurance (if applicable), sure. But there are other costs of homeownership as well. Personalizing, modernizing, and redecorating, anyone?
Oh, and you’ll need more furniture to fill all that extra space. That $3,500 leather sofa would look so good in the living room, wouldn’t it?
Maybe it would, but that money would also look really good in your bank account. Jumping into too many purchases or renovations too soon can be a costly mistake. When buying a house, you can’t simply determine how much house you can afford. The costs of homeownership include furnishings, upgrades, and repairs that need to be in the budget as well.
And we know what you may be thinking: “But I’ve got a credit card for that!” A credit card can certainly help when money is tight, but that’s one of the classic first time homebuyer mistakes: thinking that a little plastic will solve everything.
When you have the urge to use a credit card, just remember how diligently you worked to get your credit in good shape to begin with. You don’t want to throw that out the window when the faux leather sofa is one-third the price, right?
2. Neglecting Your Credit
There’s a reason we’re spending so much time talking about credit. It’s so easy to throw caution to the wind once you’ve closed on your home.
Luckily, this is one of the easiest first time homebuyer mistakes to avoid…when it’s on your radar. Well, we’re putting it on your radar now. Not only do you want to avoid spending recklessly, but you also want to consciously take care of your credit rating in the process.
That involves paying off your monthly credit card balances in full—or, if that isn’t doable, at least charging as little as possible. When you do have to use a credit card, always use the one with the lowest interest rate.
Keep in mind that as your debt climbs, so does your debt-to-income ratio (DTI). This score is important if you might be looking to finance other items in the future, like a car, a boat, or even a second home.
You can also protect your credit by keeping your current accounts open (aka don’t close any credit cards). At the same time, you don’t want to endure more credit inquiries, so also don’t open any new credit accounts.
Careful budgeting can also prevent you from going on a spending spree with your credit card. This is an important habit now, as you have to factor in all your housing costs and your home loan on top of your typical monthly spending.
3. Not Expecting Supplemental Property Taxes
You know that you have to factor in property taxes when determining how much house you can afford. This notion sometimes goes out the window, though, when you receive the first bill for your property taxes and it looks a lot lower than you had anticipated.
You just got a windfall, right? Wrong. You’re about to walk into one of the most common first time homebuyer mistakes.
APM’s trusted Loan Advisors always mention that there may be some additional supplemental property taxes after buying a house. It’s something your real estate agent should mention, too. These taxes typically come from the county, and they cover the difference between the newly assessed value of the house and what it used to appraise for.
This tax is normally prorated for the remaining number of months in the year. When you buy a house, you should budget for this notice during your first year of homeownership.
4. Not Having Adequate Insurance
Your mortgage lender will require proof of homeowners insurance, but that doesn’t mean the minimum coverage will suffice. Review your homeowners insurance policy with your insurance provider, and ask questions. Don’t forget to ask worst-case-scenario questions about natural disasters and what the policy actually covers.
We know it’s a bummer to think about these issues when you’ve just bought a home, but it’s a good idea—especially if it turns out that you’re underinsured. You’ll want to consider your risk tolerance, your monthly premiums, your deductible, and whether a personal liability umbrella policy may be a good idea for you.
5. Underestimating Home Improvement Costs
A dining table may sound like a good use of money, but that leaky sink? Pssssh. You can fix that yourself…right? That depends: Are you a licensed plumber?
You don’t have to go to the professionals for every little thing, but you can avoid some first time homebuyer mistakes by knowing when you do need to call for backup. Electrical wiring, home additions or expansions, and plumbing-related issues are best left to the professionals.
And here’s something else to consider: Many of these repairs or renovations may also require a permit or HOA approval. That’s right: It may be your house, but failing to follow the protocol with major changes is one of the costly homebuyer mistakes.
Conversely, if you are in a homeowners association, some of those repairs may be included in what the HOA pays for (outdoor items in particular), so be sure you’re familiar with the details of your HOA agreement.
6. Ignoring Routine Maintenance
There’s a huge difference between a flooding toilet and a faucet that drips every 30 seconds. You have to prioritize, after all. But once you’ve tackled all the “must fix ASAP” items on your list, you should still turn your attention to smaller things.
This includes both noticeable items like a leaky faucet or a drafty window and those that don’t jump out at you. For example, has anyone ever cleaned out that chimney?
Create a list of recurring, preventative maintenance tasks, and stay on top of it.
Replace old light bulbs with energy-efficient LEDs. Check all your smoke alarms and carbon monoxide detectors. Clean your gutters. Change your air filters. Winterize your pipes.
Set aside an emergency fund that not only covers big-ticket repairs like a broken refrigerator, but also smaller items like a broken sprinkler.
If ignored, all the “small items” can turn into bigger issues. Next thing you know, you’ve walked right into one of the first time homebuyer mistakes. It’s better to nip home maintenance issues in the bud when you first notice a problem—or, better yet, when you’re conducting your quarterly maintenance review!
Do You Need a Little More Help?
The first year of home ownership is such an exciting time. Don’t let a costly mistake dampen the mood.
The good news is that your APM Loan Advisor is always here—even after you close. Get in touch with us anytime with all your homeownership questions. We’re happy to help!