Buying a home is exciting, especially when you’re buying for the first time. However, in the midst of all of the excitement, it’s easy to become blinded by beautiful back-splashes, granite and quartz counter tops, hardwood floors, and resort style backyards, particularly if you have been out touring many of the new model home communities in the Phoenix area.. While looking at homes that are completely perfect from top to bottom, you may begin to rationalize a larger purchase than you had originally planned for — “This house is perfect for me; it’s worth $50,000 extra dollars for me to have a house with enough space in a perfect location,” or “We were planning on spending a little bit of money on painting; we can spend $50,000 extra on this house because it doesn’t need any work.”
1. Overspending
Before you even set out to tour properties ( especially model homes), you need to know exactly how much you can afford. Use our calculator tools, but these tools are only estimates. Use them as a guide, but then adjust the amount based on your individual situation. How much is your current rent payment? Did you meet that payment each month with ease, or was it a bit of a struggle each month? The payment you can afford right now is a good indicator of what you’ll be able to afford in your new home. Mortgage Calculator
Meet with a lender and get pre-approved for an amount you can afford. We recommend using local lenders for their knowledge of the Arizona market and forms needed. Also, keep in mind that it’s always better to lean towards a lower amount, rather than a higher amount. You do not have to use the entire amount you’re pre-approved for. Once you know how much you have to work with, then and only then should you start your home searches. Need a local lender referral?
2. Counting chickens before they hatch
When determining how much mortgage you can afford, base this amount on what you are earning today. That is, the income that you and your spouse earn from stable sources. If you’re in your last year of law school, for instance, don’t assume that you will be earning much more money in a year or two, so you can afford a larger payment. If your wife is expecting a big promotion, don’t base your mortgage payment off of her potential salary increase. No one can predict the future, and although you may very well be in a better financial situation a year down the road, there is no guarantee.
3. Failing to account for closing costs, property taxes, HOA, and homeowner’s insurance
When you rent a home, you generally only have one payment — rent — and then maybe renter’s insurance, which is optional. When you buy a place, your mortgage payment is only the beginning of an array of costs. Homeowner’s association fees can be as low as $0 or as high as a few hundred dollars per month, depending on where you live and the amenities and services offered.
Homeowners insurance and property taxes vary based on location, size, etc. As a very general rule of thumb in the Phoenix area we use 1% of the purchase price to guess on property taxes. For many properties, home insurance can be roughly figured at $50-$75 monthly.
Then on top of all of those costs, if your down payment is less than 20 percent of the selling price, you may end up paying an additional cost — private mortgage insurance (PMI) — which is basically insurance for the lender in case you default on your loan.
At the end of it all, your $1000 mortgage payment can easily turn into a $1,400 house payment.
4. Failing to protect yourself with a knowledgeable Realtor
During your home search you will want to arm yourself with a qualified Buyers Agent, that will help you through the process. Buying your first home is likely the largest purchase you have ever made, don’t leave it to just anyone to assist you. From inspection snafus to delayed closings, or mortgage issues, a properly informed buyers agent is going to ensure the hurdles are handled with minimum. wear and tear on you. At Arizona eHomes our entire staff is always continuing to educate and are all Accredited Buyer’s Representatives, ensuring that you meet your real estate goals.
5. Being too naive or too paranoid
Some first-time home buyers are naive. Overly optimistic, they think nothing could possible go wrong. If a home has a few problems, they view them as easy fixes and are unrealistic when it comes to the cost and time it takes to fix up the home. Some naive buyers will move to a neighborhood on the wrong side of town, forgetting that you can fix up a house, but you can’t change your neighborhood or location without moving.
Paranoid buys are sometimes difficult to work with. They may not believe the price is an accurate assessment of the house’s market value. They’ll submit low-ball offers and then show frustration when they are consistently rejected. Paranoid buyers don’t trust real-estate agents, and may even try to buy their home without an agent, which is an unwise choice.
Contact Arizona eHomes for helpful tools, tips, and planning to make your first purchase a fun filled experience.
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