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So far, 2024 is shaping up to be a tricky time to buy a home. Not only are property values elevated, but there still isn’t a lot of inventory to choose from.
If you’re looking to buy your first home in 2024, you might get overwhelmed by today’s tough market. And that might cause you to fall victim to certain pitfalls you’re better off avoiding, like these.
1. Not checking your credit score before applying for a mortgage
As of this writing, the average interest rate on a 30-year mortgage loan is 6.66%, according to Freddie Mac. But that doesn’t mean you can’t snag a better rate. Whether that’s possible or not, though, will depend on your credit score.
In a nutshell, your credit score tells mortgage lenders how much risk they’re taking on by loaning you a large sum of money for a home purchase. The higher your score, the more comfort lenders get, which is why it’s so important to see what your score looks like ahead of your mortgage application and take steps to boost it if it could use work.
You can raise your credit score by paying bills on time, paying off credit card balances, and correcting errors that may be lurking on your credit report.
2. Not shopping around with different lenders
The interest rate one mortgage lender offers you may be quite different from the rate another lender offers. It’s a good idea to shop around with different lenders, rather than accept the first mortgage offer you get.
And during that shopping, don’t just look at interest rates. Consider the terms of each loan agreement. One lender may impose much higher closing costs than another, leaving you to pay higher fees to put your mortgage in place.
3. Assuming you can’t negotiate your home’s purchase price
Because there’s not a lot of housing inventory to choose from these days, you might assume that you have to pay whatever listing price a given seller puts out there. But that’s not automatically true.
If you’re buying a home that clearly needs work, you and your real estate agent can devise a strategy to negotiate the price downward. Similarly, you may be able to get a seller to come down on price by being very flexible with your closing date — for example, being willing to put it off if your seller wants more time to move.
You may have a seller with school-aged kids whose home you make an offer on in March. That seller may prefer to stay put until June, when the school year ends. Agree to that rather than an earlier closing, and it could be your ticket to a bit of money off of your purchase price.
4. Underestimating repair costs
At a time when there’s a pretty notable lack of real estate inventory, you may have to compromise on the home you buy. And that could mean purchasing a place that needs some work.
But if you’re going to do that, try to get an estimate of what it’ll cost to fix that home up before moving forward. You may be able to afford the mortgage payments and associated costs of a given home based on its listing price. But if you also need to spend $20,000 your first year in that home to get it into livable condition, that might bust your budget in a serious way.
Buying a home in today’s market can be a daunting experience — whether you’re a first-timer or not. But if you’re new to homeownership, make sure to avoid these mistakes as you go about your home search.
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