10 First Time Homebuyer Mistakes

by Ron Haynes

first home

Becoming a first time home buyer is a thrill for almost everyone. It was for my wife and me when we bought our first home. People get so wrapped up in their first home they tend to identify themselves with it, I know I did. Have you ever called your neighbors down the street the “blue house” people? Or told someone that you live in “the Victorian on Mountain Crest Road?” We were the home with the “front porch on the corner” people.

When first time home buyers finally get into their home, they can easily fall prey to several serious mistakes that can cause a large amount of financial harm later. Here are a few of those first time home buyer mistakes that I made:

1. I ignored the home inspector.

We were so excited and desperate to get into a home, I was willing to ignore important items … like the crumbling old furnace. I reasoned that I could always fix it later, besides we were buying the house in April. That old furnace made it through one more winter before it died and it cost me $1,500 (in debt) to replace it. Had I known more about the Secrets of Power Negotiating, I could have used the furnace as a pivot point in the purchase negotiations and possibly gotten one for free!

2. I went further into debt after making the purchase.

After all, we needed furniture and new draperies and new blinds and new this and new that. I also needed to have my head examined. Here I was, fresh out of Consumer Credit Counseling, spending money I didn’t have. I still had not learned my lessons about debt.

3. I didn’t calculate my budget properly.

Even though I had gotten a substantial raise that had helped me pay off all my debt, I bought a home that put a severe strain on our budget. Things are much more expensive when you own a home. You have a property taxes to pay, homeowners insurance, a yard to mow, landscaping to do, water and sewer bills, and repair bills. Unless you have a maintenance free exterior, you’ll have to paint every 4 to 6 years, fix little things like the rotted siding on the chimney, and the decomposing cedar posts that hold up the front porch. If you’re on a septic tank, it needs to be cleaned out every few years, you have to fix or pay to fix everything that goes wrong. I didn’t budget for these things and they cost a lot of money.

Ready for a mortgage? Let the banks compete for your business with LendingTree.

4. I didn’t fully disclose everything on my financial statement.

Before you panic, let me explain. My boss was gracious enough to give me 100% of my annual raise up front so I would have enough for the down payment, but I got my mortgage based on my new total compensation level spread out over the year. The raise I had received was very, very substantial, but using all of it for a down payment meant I had to go another full year at my old rate of pay.

5. I didn’t negotiate with my Realtor for a better commission rate.

She had us pegged as desperate the moment she laid eyes on us. You don’t have to pay the listed rates, you know. Especially in today’s market, Realtors and home builders are desperately seeking buyers. Under these circumstances, you call more of the shot than you realize and can probably negotiate a much better commission rate. And I also forgot the rule that real estate agents don’t understand finance.

6. I chose a home that was too far away.

They say the three rules of real estate are location, location, location and you know what? It’s true. One reason I chose the home was its price. I reasoned that I could afford it, and I ignored the 19 miles one way it was from my place of work. I also ignored the 16 miles one way it was from my kid’s school, the 22 miles one way it was from my parent’s home, and the 12 miles one way it was from our preferred grocery store. Those miles add up fast and cost me more in gasoline, wear and tear on the car, and just plain old fatigue from driving.

7. I fell for the refinancing craze.

Yep, I did that too. I “pulled the equity” out of my home to make some upgrades. That’s just a fancy way of saying I went into more debt and extended the number of years I would be in mortgage debt in order to shave a few dollars from my payment. I felt like I was so smart!

8. I fell for the refinancing craze … again.

This time I didn’t re-finance, but I probably obliterated my credit in a furious attempt to get an even better interest rate just 18 months later. I thought I would “pull out more equity” and get a better payment. I theorized that I could “lock in” my profits from the appreciation of the home’s value. All I did was take my credit score down a couple of dozen points from all the inquiries. Oh yeah, I also paid $350 for an appraisal and then didn’t re-finance.

9. I had no idea how much closing costs I would incur.

We were using an FHA loan at the time and there were some items the sellers had to pay because of the structure of the loan, but I had no idea how much my portion would be, nor how much it would add to the amount financed. I was too focused on just getting the house.

10. I fell in love with the house before I bought it.

That was my biggest mistake. It was the right size for us at the time, it was in my price range, it had a big back yard and room for a garden, it had a full basement with a workshop, the master bedroom was on the main level and it had a big open kitchen. It was everything my wife and I wanted in a home. What I never realized was that there were probably 250 other houses that would have been everything my wife and I wanted at the time. I lost patience because our lease was almost up at our apartment and the landlord wouldn’t renew on a month to month basis. I had to get into this house, and that was my biggest mistake.

I still love that house, yes, that’s it at the top of this page. Cute isn’t it? But if the truth is told, I wish I had been more selective and had searched for a home that was closer to where we lived our lives and closer to our ability to pay. Don’t make the same mistakes I’ve made.

Patience will pay great dividends when searching for your single largest and most personal investment.

What first time homebuyer mistakes did you make?

About the author

Ron Haynes has written 989 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.



{ 14 comments }

Kay

Unless you plan to stay in the house until you are ready for a rest home please think twice before buying a house with stairs – inside the house or outside. At the least you want a master bedroom on the main floor, and you especially don’t want a washer and dryer in the basement. It would be nice if we all could remain young and able to bounce up stairs easily – but believe me it isn’t that easy forever!

Ron

I concur! When I bought this house I was much younger and the master bedroom was on the main level. We did have to climb stairs from the basement garage though.

Money Smarts Blog

Great post. Experience is good teacher. ;)

Victoria

I loved this blog post. I shared it on Facebook. It is so honest and it goes into such detail. Everyone should read this before buying their first home. People put so much emotion into home buying. They allow their hearts to do more of the decision-making than their common sense! Thank you for pointing this out.

Ron

Money is an emotional product and when you tie so much of it up in a home, it becomes an emotional purchase. If we can take the emotion out of it, we will all make better choices.

Bankruptcy Ben

It’s almost like this is something that everyone has to go through. I’ve come to realise my mortgage is too high, too high it is for me to be able to make extra payments to pay it off quickly. I’m in the processess of getting my house ready for sale, them i’m going to buy something cheaper. Hopefully I’ll make some money on the deal as well.

Jim

I bought a fixer-upper: 9 rotted windows, a finished attic that needed to be totally gutted, a kitchen floor that was so rotted it wouldn’t support my weight in places, and several other rooms that needed new flooring and extensive drywall and trim work. Oh, and did I mention that flood-prone crawl space?

My reasoning was hey, we’re getting a great deal on this house. The money we save on the mortgage will leave us with plenty leftover for repairs, plus we did negotiate with the seller for a discount and cash back at closing to make some of the immediate repairs.

My mistake wasn’t overestimating my ability, it was overestimating my time. After a long week at work it is exhausting to come home to…more work. Plus, on some of these big projects there is only so much you can do with weekends, which means I’m also spending some of my valuable vacation time working on the house when I ought to be relaxing or taking my wife somewhere nice. Second mistake was a little out of my hands. When my son was born the hospital kept him under observation for one night longer than our insurance would cover, which ended up costing us $8k that had been slated for home repairs.

Ron

I know exactly what you mean. I just finished a “built-in” entertainment center/bookcase for our living room that took everything I had (physically) for several weeks. I travel a great deal with my job and having to come home and work on that monster was exhausting. I finally finished it and it now looks great, but what you said is spot on. I have the ability, it’s time that comes at a premium.

Big Joe

I am always amazed at why “first time homebuyers” are collectively identified as high risk consumer and financial morons. Buying a house for the first time is no different than buying a car, truck or an RV. It is just more expensive and has higher monthly payments [unless your getting one in a ghetto neighborhood].

These consumers are just not reading the contracts and creating a “to do list”. They are not doing the 6th grade arithmetic [assuming they finished 6th grade]. They are not visiting the bank loan officer and asking for the Home Buyers Guide that most all banks give out for free. They are visiting a book store; the library or doing a internet search on How to buy a Home.

The morons are far and few between and should not be lumped in with the Smart First Time Homebuyers. Oh and why not just ask a parent, friend or lawyer [god forbid] on how to buy a home and what must they do ?

Hey all you “first time home buyers” .. here is a hot tip .. NEVER use the listing agent as your agent .. they are like lawyers .. if thier lips are moving, they are lieing..! The listing agent does not work for you. They work for the seller ! Remeber, the listing agent gets the full 6% realestate commision and does not have to split it 50/50 with your BUYING agent.
However .. if your determined to be a Consumer Moron .. at least spend an extra $500 and get a realestate lawyer to do your paper work and make sure nothing is overlooked; as well as; explain all the details of the sale and mortgage terms to you.

Ron

I understand your frustration, but buying a home is a far cry from buying a car, truck, boat or RV. Not only is the price significantly higher in most cases, but real estate laws differ greatly for sales and purchase transactions than for other consumable goods. A car purchase doesn’t require 30 signatures and an attorney.

There ARE some smart first time home buyers, but many got that way by learning from the experiences of those who made mistakes and were willing to write about and discuss them.

Oh, and you don’t have to be a moron to make a mistake, just human.

margaret

Oh, I did all that and more. And I find myself retired with a home that is not paid for along with a home equity loan. So it was an AFGO: Another $#%@ growth opportunity.
But keep in mind, “One always regrets the path not taken.”

CoMortgageResource

This article has so many great points for home buyers and there are some important considerations brought up in the comments (stairs, overestimating the time involved in renovation, etc). I’d love to incorporate it into a blog on the First Time Home Buyers Blog< on my website. Thanks for the information!

Ron

Thanks, but this article is copyrighted and cannot be duplicated without written permission.

CoMortgageResource

I featured some of your recommendations in a blog on my website entitled If I’d Only Known Then….. I hope you think I did your post justice – thanks again for the information!

Previous post:

Next post: