Before buying your first home in the greater San Diego area. Read our how to avoid first-time San Diego home buyer mistakes guide to save you money.
The National Association of Realtors – NAR (we are members), studies show 56% of all buyers believe the biggest challenge during the home buying process is picking a house. And, generally, buyers tour 10 homes in 10 weeks before making a purchase.
Here’s How to Avoid First-Time San Diego Home Buyer Mistakes
Take a look at these 13 mistakes many first-time homebuyers make. We offer solutions for all of them.
1. Looking at Houses You can’t Afford
Don’t waste your time previewing expensive homes you can never buy. You need to know the maximum price range you can afford before looking.
Solution: Meet with a mortgage lender to find out how much you can afford. San Diego mortgage lenders analyze your monthly income, debts, assets, and credit history. Then, they show you the maximum price for you.
Your mortgage lender prepares a preapproval mortgage letter to show to the seller when making your first offer. It tells your seller that you can afford to buy the home. This letter gives you an advantage over other buyers wanting the same home. That’s because sellers do not want to waste time accepting offers that won’t close.
2. Not Working with a Buyer’s Agent
Many buyers ask the seller’s listing agent to represent them. This creates a conflict of interest as the seller’s agent is already committed to getting the seller the highest price.
Solution: A San Diego buyer’s agent works exclusively for you with a duty to protect your interests.
3. Failing to Look for First-Time Home Buyers Programs
Most first-time homebuyers don’t have a lot of cash to buy a home. Besides the purchase price added expenses include escrow (closing) fees, mortgage costs, and down payment.
Solution: Look at these first-time home buyers’ programs.
The San Diego Housing Commission (SDHC) offers low-income family home buyers deferred loans, grants, and mortgage credits for their first home. They named it the “SDHC First-Time Homebuyer’s Program”.
The California Housing Finance Agency (CalHFA) offers special mortgage programs like:
- CalHFA FHA Loan Program: A Federal Housing Administration (FHA) first mortgage insured low 30-year fixed interest rate;
- CalPLUS FHA Loan Program: A different FHA loan with a slightly higher 30-year fixed interest rate;
- CalHFA USDA Program: Guaranteed by the U.S. Department of Agriculture (USDA) offering a low 30-year fixed interest rate first mortgage; and
- CalHFA VA Loan Program: a first mortgage Veterans Affairs (VA) low 30-year fixed interest rate.
4. Ignoring a Home’s Downsides
You walk into the entrance of a home and fall in love right away. It’s beautiful and inviting and you can’t wait to move in. But you need to look at the whole house.
After looking at a dozen homes in a couple of days you tend to forget details or mix up which home had the best storage space.
Solution: Create a list of likes and dislikes for each home you visit. Take phone photos of the inside and outside to help you remember which one had the three-car garage. Pay attention to unattractive qualities along with attractive ones.
Other factors to consider outside of the home include:
- How long of a commute to work?
- Which neighborhood offers the best schools for your kids?
- What about nearby parks, shopping, restaurants, and entertainment?
- What’s the crime rate? and
- How good is the nearby neighborhood?
5. Not Realizing What It Takes to Move-In
Buying a home using a mortgage requires professional termite and home inspections. A home may pass standard inspections. But you may find important fixes delaying your moving in.
Some homes need repairs or remodeling. Unless you find the perfect fit for your family size and needs, most homes may require tweaking.
Solution: A careful inspection may reveal a need for a new roof, or a new furnace or water heater. Inspecting the basement, chimneys, and attic you may discover mold, cracks, and other hidden problems.
6. Using Up Your Savings
Plan for a down payment, escrow closing fees, mortgage costs, moving expenses, and other unknown costs. If your savings run out with more expenses waiting for payment, you might end up unable to complete the purchase.
Solution: Ask your buyer’s agent, mortgage lender, and escrow closing officer about all the costs to know ahead of time if you saved enough money. Also, plan for your relocation costs.
7. Overpaying Your Home
First-time buyers often pay more than they should. Inexperience and not getting good advice from their real estate agent may lead to paying more than what the seller would accept.
Solution: Ask your agent for a Comparative Market Analysis (CMA) which compares the prices of similar nearby homes recently sold.
Besides paying too much for your new home don’t become hesitant. Taking too long to decide to buy or not may lead to another buyer getting the home.
You must move fast in a hot real estate market. But even when the market slows down the best homes sell faster.
Solution: After looking at many homes and knowing the market prices if you find a home you like, don’t hesitate.
9. Misjudging the Cost of Home Ownership
After buying your first home, monthly bills keep adding up. Many first-time buyers become surprised at the different types of monthly bills.
Besides paying the monthly mortgage, you got electricity, gas, and cable bills. Adding up all these for the first time may shock you.
As a renter, you paid many of these bills. But once you own your home extra bills mount up. You get new bills like homeowner’s association fees, property taxes, and higher insurance costs. You also pay for all the maintenance and repairs.
Solution: Your Realtor can tell you the neighborhood’s property taxes average. Ask for the seller’s utility bills for the past year of occupation which helps to know what to expect.
10. Not Considering Repairs and Renovation Costs
Your new home may require repairs. You may need to renovate rooms to expand or provide useful purposes like a home office. Your back and front yards may need landscaping. Wooden floors may need resurfacing. Painting the interior and exterior to fulfill your taste in colors.
All these require professionals who provide estimates. You will find out why they call them “estimates” with no guarantee of the final cost.
Solution: Ask your Realtor for recommendations of reliable fair costing contractors. Always get more than one estimate for repairs and renovations. Assume all estimates are low.
11. Running Up Credit Costs Before the Purchase Closes
You might want to buy appliances or furniture on credit or get a new credit card or obtain an auto loan before the purchase finalizes (closes).
This is a mistake because the time between signing your purchase agreement and closing becomes critical. Until the closing, running up extra credit costs affects your credit score (creditworthiness of an individual) and your debt-to-income ratio (percentage of your income paying monthly debts).
A week before closing your mortgage lender will check your credit score and debt-to-income ratio. If one or both changed negatively your lender may increase your mortgage fees or interest rate. This may delay your closing or even cancel the mortgage.
Solution: Wait until after the closing to incur these expenses.
12. Missing Your First Mortgage Payment
Too many new homeowners expect their first mortgage payment due on the first of the month. Not so after the closing. “It’s due the first day after the full month after you close”.
For example, if you close on May 15th, your first mortgage payment isn’t due on June 1st. It’s due on July 1st. This confuses first-time home buyers.
As a result, many new homeowners miss their first mortgage payment. They assume it’s automatically deducted. Or, didn’t see the bill in the mail. Usually, a misunderstanding about how the mortgage payment process works.
The first couple of payments become very important from a credit perspective.
Solution: When attending the closing, ask the escrow or title officer when the first mortgage payment becomes due and remember it. Ask about what types of notifications you will receive about the next payment. Keep an eye out for that notification. Also, your mortgage lender should provide you with all the details about future payments.
13. Not Learning about How to Buy a Home
Finally, learning how to buy your first home gives you valuable knowledge for smoother purchases.
Read some of our past posts here to learn more about buying a home in San Diego and the rest of California:
Follow our 12 how to avoid first-time San Diego home buyer mistakes solutions.
They will save you time and money. To sum it up:
- Only look at homes you can afford;
- Work with a buyer’s agent;
- Research first-time home buyers’ programs;
- Look for a home’s downsides;
- Know what it takes to move in;
- Don’t use up your savings;
- Don’t overpay for your home;
- Be decisive;
- Know the cost of homeownership;
- Consider repairs and renovation costs;
- Don’t run up credit costs before the purchase closes;
- Don’t miss your first mortgage payment; and
- Learn how to buy a home.
Nervous about Purchasing Your First San Diego Home?
Don’t worry! Let our skilled professional Realtors at Big Block Realty guide you through the entire home purchase process from looking to closing on your dream home in the beautiful San Diego area.
Contact us to learn more about home searching, making an offer, applying for a mortgage, and the transaction closing process in the greater San Diego area.
Steven Rich, MBA – Guest Blogger
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