First Time Homebuyer Mistakes
There are many people from your spouse, parents, realtor, etc., who might be giving you advice (good and bad) about buying your first home.
Buying a home (especially your first home) is a serious financial decision, so plan ahead and ask a lot of questions.
Owning a property in Orange County is very pricey and first time buyers should be extra cautious as they dive in to home ownership.
Some cities like Garden Grove and Anaheim are still affordable, while Laguna and Corona Del Mar are not ideal for 1st time buyers.
But the most important thing is to avoid making any of these crucial mistakes that we have listed here below.
1. Not Knowing How Much You Can Afford
As recent history and the subprime mortgage mess has taught us, just because a bank says you can borrow $1 Million doesn’t mean you should.
The best way to realistically figure out how much house you can afford (total sales price and monthly) is to get a real budget written out.
This will include all your bills like credit cards, car payments, food, daycare, student loans, etc. etc.
Once you have all of this compiled then you can really start figuring out how much you can afford to spend when you buy a home or condo.
Of course interest rates and such can change a little by the time you do buy a home, but you’ll be in good shape by doing this.
Some buyers agents will try to get you to look at homes outside your price range, and you just have to have self-control to say No.
Because once you start looking at homes outside of your price range you’ll be disappointed in the home you can actually afford to buy.
Maybe you can’t afford buying a condo in Huntington Beach so you look in Westminster or Fountain Valley instead?
Don’t be seduced by what “the Jones” are buying, or how much your friend paid for his house, focus on yourself.
2. Forgetting to Consider All Expenses
As soon as you become a homeowner, suddenly you’ll be hit with bills you’ve never even heard of, trust me.
Things like property tax, homeowners insurance, flood insurance and then of course repairs for a roof, fence, etc.
As a renter you just call your landlord and tell them something is broken, and Boom it’s fixed, but not when you own the property.
These bills and repair costs can add up very quickly and suddenly your whole budget is out of whack.
In addition, if you are considering buying a condo then you have to plan on paying tthe monthly HOA fees – Homeowner Association,
This monthly fee goes into a bank account that helps covers repairs and maintenance issues with at the property.
Each state, city, and community is different so check with your agent about what the HOA fees are you might pay.
And for those 55 and over looking to buy in OC, you’ve gotta be very aware of your retirement budget going forward.
3. Just Being Too Darn Picky
It’s like the old saying, “champagne taste on a beer budget”, well that goes for buying a home in OC also.
It’s definitely smart to put together a wish list with your spouse or family (if you have one) but be flexible.
Most first-time homebuyers have to compromise on something because they don’t have equity in a house or a big down payment.
If you are too picky then you can end up renting for another 5 years before you finally accept the fact you need to be open minded.
Maybe you have to live on a busy street, or you need to buy a condo, or maybe you end up buying a 2 bd house instead of a 3 bedroom?
There is nothing wrong with renting if you don’t want to compromise on your purchase, but don’t be hard headed.
Maybe buying a fixer-upper in Costa Mesa is an option that can save you a lot of $, and allow you to buy in Newport Beach later on.
4. Skipping The Mortgage Qualification
Many times a renter will think they can afford to borrow $500,000 from a bank because they have good credit and have a good job.
But applying for and getting a mortgage from a bank is a lot more complicated than just needing a job and thinking your credit score is good.
For example you might make all your payments on time, but if you have tons of monthly financial obligations you’ll be surprised.
Always get pre-approved for a loan before you start asking your realtor to drive you all over OC touring homes you hope to buy.
Otherwise you could be wasting the seller’s time, and your agent’s time if you sign a contract and then find out the bank won’t lend you the $.
Even when you are pre-approved for a mortgage, there is a chance your loan could fall through – for a variety of reasons.
Making a major purchase like a car can change your credit score which could affect the deal to fall apart.
If the deal does fall through based on something you did, there’s a chance you’d have to forfeit the money you put up when you went under contract.
Best advice is to always ask your buyers agent for help when you are confused or unsure.
5. Don’t Get Caught Up In The Moment
Good listing agents and a smart homeowner know that even the simplest cosmetic fix or trick can make a home appear better.
Buying a house (especially your first home) is an emotional journey and if you are caught up by the beaufitul entry-way and the front door, watch out.
Maybe the homeowner has really spiced up the front entrance to get potential buyers in a “buy now mood” before they’ve even toured the home.
Try to take the emotion out of the purchase, and look at every home you tour with great detail, look for what’s wrong with the home.
When things appear too good to be true they usually are, so stay level headed and maybe tour a home 2 or 3 times before putting in an offer.
6. Not Being Open Minded
Many first-time homebuyers are on a tight budget, but sometimes they forget to keep an open mind and see past the imediate.
Maybe you hate the vinyl floors in the kitchen, or you hate the carpet, but in cities like Huntington Beach and Laguna, etc. you can’t afford to be picky.
If the home or condo you like is in the right location, in a good school district, and has a good floorplan and nice backyard, then be open to it.
You can’t change the location of the house, but you can always make minor improvements later on when you have the money to do so.
And even if you had to hire a contractor to do the work, if done correctly you will benefit by building equity in your house – over what your spend on repairs.
Bottom line is that when you are buying your first home, you can’t just expect to get everything you want – not in Orange County where prices are sky high.
Keep an open mind and you’ll find ways to make buying a condo in Orange County much easier, or finding a new place to retire.
7. Ignoring The Importance Of An Inspection
When you are about to spend $500,000 or more on a condo or house in OC, don’t cheap out or ingore how important an inspection is.
So even though you think you’ve found the perfect house to buy, and you’ve opened escrow with your agent, slow down a bit.
Because now you need to hire a professional home inpsector (your agent will help you find one) and the inspection will let you know the shape of the home.
Things aren’t always what they seem, and without a professional looking at the roof, plumbing, sprinklers, etc., you’d never know what problems are hidden.
So just be sure to stay level-headed about the home purchase until the inspection is completed and comes back pretty clear.
Most older properties will always have little things wrong, old water heaters, dripping shower heads, etc.. Those can be fixed easy and cheap.
But if your inspector gives you a 11 page report with 42 Big problems like you need a new roof, then you might want to find another home in OC to buy.
8. Overlooking The Important Must Haves
Do you own pets, maybe a certain breed of dog?
Well make sure the community you like doesn’t have breed restrictions?
Maybe you only have 1 child now and so you and the wife think a 2 bedroom condo would work for you now because you can afford it easily.
But if you are planning to have another kid in the next 5 years, then realistically the 2 bedroom condo isn’t a good purchase.
Yes you might have to compromise a bit, but don’t rush into buying a home or townhouse because you can afford it, think about the bigger picture.
Maybe buying the 3 bedroom will be a bit tigther on your budget, but 4 years from now when you have the 2nd child you won’t have to move again?
It’s always a tough call on what to buy, but don’t buy something today that won’t fit your lifestyle in say 5 years or less – you’ll have problems if you do.
9. Not Planning Ahead
Of course you don’t have a crystal ball to tell you that Costa Mesa will appreciate at 15% this year, and Dana Point at only 8%, but paying attention has its perks.
There are a lot of things you can research or ask your agent about to ensure you took the precautionary steps that were available to you before you bought the home.
Some of the questions and concerns you should address would be:
- What have home values done in the neighborhood over the last 20 years?
- Is there a chance that a major highway could be built across the street anytime soon?
- What are the zoning laws in your neighborhood?
- is there a lot of undeveloped land nearby, and if so what could be built there?
10. Not Hiring a Buyers Agent
Believe it or not, some home buyers (even first timers) think they will do just fine buying a home in Garden Grove or Irvine on their own.
I mean sure you might be a very smart and financial type of person, but that doesn’t mean you are good at buying homes and negotiating.
The main reason to use a buyers agent is because it cost you nothing to have a buyers agent help you with the entire process.
The home seller is the person that pays the commission to both buyers and listing agent, so don’t pass up the free help.
Buying a home is a Huge investment of time and money, and trying to do it yourself as a first-time buyer is a Huge mistake.
11. Don’t Believe Everything You Hear
A lot of first-time buyers just assume that their mortgage broker, and agent, and insurance agent will have every answer.
If you feel you aren’t getting answers, or want to verify what you are told, don’t be afraid to speak with somebody’s boss or supervisor.
Maybe even call another mortgage broker for a 2nd opinion. You never know and you don’t want to regret buying a home.
If you need to call the city of Santa Ana or Anaheim (or wherever you are buying) and ask about zoning laws or whatever.
At the end of the day it’s your $ and your name signing a 20 or 30 year mortgage, so follow your gut feelings when need be.