3 Common Errors When Purchasing

First-time buyers have discovered the housing market difficult to break into. Typically, they will submit 3.8 offers before their offer is accepted, which is greater than the 2.5 offers that repeat buyers typically make, as outlined by a new survey of about 2,000 U.S. adults from NerdWallet, a personal finance website. Furthermore, 56% of first-time buyers say they offered even more than the asking price before they were successful in their home purchase. To compare, 35% of repeat buyers say they offered above the asking price.

3 Common Errors When Purchasing for the First Time

“It shows that things are tough out there for first-time home buyers,” says Holden Lewis, home expert at NerdWallet. “There’s just more competition for those homes. There’s not a whole lot of them out there in a lot of markets, and there’s a lot of buyers who are competing for those homes.”

As the newbies in the market too, first-time buyers could possibly be more prone to some mistakes, including lowballing initial offers or neglecting to shop around for their mortgage, Lewis says.

Here are three common errors first-time buyers often make:

Neglecting to look around for a mortgage: NerdWallet’s research discovered that 50% of all buyers applied to only one lender for their mortgage. However that may very well be leaving money on the table. Looking around can help you save, on average, $430 in interest in the first year for those having a fixed-rate $260,000 mortgage, NerdWallet’s study finds. “That savings would accumulate and compound for every year that they had the loan,” Lewis told CNBC.

Believing the 20% down payment myth: Lewis says another common rookie mistake is believing you must put down more of a down payment than you really do. Seventy-one percent of current homeowners say they made down payments of 20% or less, in accordance with U.S. Census Bureau data (of those, 23% of buyers put down between 11 to 20 percent; 16% put down 6 to 10 percent; and 32% put down 5 percent or less). In markets where home prices are rising at a faster clip, buyers may find it time to buy now as opposed to wait until they ‘ve saved a 20% down payment, Lewis says. But Lewis adds that in some markets, however, home values may be increasing well over what a buyer would pay for mortgage insurance. Lenders usually require mortgage insurance when borrowers don’t put a minimum of 20% down.

Showing unwillingness to compromise: First-time buyers can certainly be going in with too-high expectations. Housing inventories in the lower price ranges, which generally first-time buyers are considering, are low and that means limited choices. Twenty-six percent of all recent buyers surveyed say they purchased a home realizing it would require improvement or work. Twenty-one percent also said they had to compromise on their list of must-haves. Real estate experts urge first-time buyers to determine their top priorities, for example commute times, schools, and square footage. “It really helps to know going into that it that you’re just simply not going to get everything you want,” Lewis told CNBC.

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