A Multi-Family Home

Avoid Newbie Buyer Mistakes: 3 Financial Tips For Buying Your First House

by Arnold Gomez

Are you in the market for new homes for sale? New home buyers are more susceptible to making mistakes, so here are three that you should keep in mind to avoid. 

Never place an offer before securing your financing

If it's your first time shopping for new homes for sale, then it's understandable that you'd experience a great deal of excitement. And if you have your eyes set on a highly desirable property, then it's also understandable that you'd want to block out your competitors by placing a hasty offer. After all, you want to show the owner (or the developer) that you mean business, right?  But if you've placed a hasty offer before securing your mortgage financing, then you're setting yourself up to be knocked out of competition. That's because you won't be able to make good on that offer without a secure, underwritten loan that you can immediately make good on. Additionally, you'll show the property owner that they should entertain other serious offers. So make sure that you have loan documents in hand before you even think about bidding on the property.

Never stretch your budget to the limit

Did you know that it's never a good idea to spend down to the last penny on your property purchase? For example, suppose that you've got your eye on a property that costs $300k. You've been offered a loan ranging between $300k-$305k. Should you place the $300k offer? No, and here's why.  If you spend all of the money you've been offered on your loan, then what money will you have left for emergencies and responsibilities that will surely arise? It's always a great idea to make an offer on a property that leaves you with plenty of cash reserves for the future. Better yet, you don't have to borrow the full amount you've been offered — this will allow you to pay down your mortgage a lot faster.

But if you simply must make an offer on the house you have your eyes on, then ask your real estate agent to negotiate a lower buying price so that you don't spend all of your loan. 

First, improve your credit score

Here's a strategy that new home buyers use in order to get the best rate on a prospective mortgage: They live in rentals for a defined period of time until they can improve their credit scores. They understand that while buying a house is the ultimate goal, they don't want to be trapped into a loan term that offers them moderate to poor interest rates. They also understand that the higher their credit scores are, the more of a stable prospect they'll appear in the seller's eyes. 

Contact a company like RE/MAX Great Basin Realty to learn more.