10 Common First Time Homebuyer Mistakes to Avoid

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first time homebuyer mistakes

The prospect of buying your first home can be both exciting and scary. Understandably— it is one of the biggest financial decisions you’ll make.

Due to lack of knowledge, most first time homebuyers make mistakes that cause them to relocate after a short while and the hustle cost of buying a new home all over again.

Luckily, with research beforehand, you can avoid these pitfalls.

Let’s discuss the ten common home-buying mistakes and solutions to equip you for a smooth-sailing experience.

  1. Not having clarity on your financial status
  2. Overlooking first-time homebuyer programs
  3. Shopping for a home before a mortgage
  4. Getting a single mortgage quotation
  5. Overlooking the neighbourhood
  6. Getting into more debt before loan approval
  7. Making decisions based on emotions
  8. Waiting for the perfect home
  9. Skipping home inspection
  10. Underestimating the cost of homeownership

1. Being Unclear of Your Current Financial Status

You need to understand every little detail of your expenses and savings, to work out how much is available for buying a home. 

Otherwise, you commit to purchasing a home beyond your budget. This can lead to foreclosure due to your inability to settle monthly payments. You will also lack money to cover any emergency expenses that come up. 

Solution: Have a clear picture of your monthly expenses to assess how much money you can comfortably pay towards a mortgage for a home. Remember to also factor in all your variable outgoing costs like grocery shopping and your monthly saving goals. 

As a rule of thumb, your monthly mortgage payments should not be more than 28% of your gross income. This percentage should, however, be lower if you have other debts. 

2. Not Looking for First-time Homebuyer Programs

There are government programs tailored towards helping low and middle-income earners to buy homes. These can come in the form of a savings scheme where you make monthly contributions towards purchasing a project that is partly funded by the government.

Others are subsidised housing development projects where, for instance, a four-bedroom house in Athi-river goes for Kshs 8.85M as opposed to the standard Kshs 15M-20M. 

Solution: Look out for state-sponsored options available via your County Government website. An example is the Boma Yangu Project which is an initiative by the Kenyan Government under the “Big Four Agenda” to ensure that Kenyans have access to decent and affordable housing, despite having lower earnings.

3. Shopping for a Home Before a Mortgage

House hunting is more fun than evaluating your financial status. It’s not a surprise that it’s the first thing you’d want to do.

Shopping beforehand makes you run the risk of finding a home that you love but cannot afford. This might lead you to buy a home and get into debt. Alternatively, you could be discouraged due to your inability to afford it. 

Solution: Focus on your finances first. Have enough for a down payment and closing costs then get a pre-approval letter before seriously shopping for a house. 

You can, in the meantime, have a list of what you are looking for in a home. What are the must-haves and deal breakers? This will come in handy once your loan is approved and can now shop for property within the right price range.

4. Getting Just One Mortgage Quote

Shopping for a mortgage is like shopping for the house itself: it’s wise to compare several options. Different mortgage providers charge varying fees, like closing costs and loan processing fees. No two lenders are the same. Lack of comparison could have you losing on a better deal. 

Additionally, note that your mortgage expenses do not stop at a down payment and monthly repayments. Your financial provider charges several fees to finalise your mortgage processing. These could be around 3-5% of your total purchase price and include: 

  • Stamp duty fee: between 2-4% of the value of your property. 
  • Loan processing fee: approximately 1% of your purchase price.
  • Legal fees: between 1-2% with a minimum fee of Kshs 35,000.
  • Valuation fees: between 1-2% of the purchase price.

Solution: Apply for loans with different providers to get a holistic picture into the rates and costs. You can start by visiting several mortgage providers’ websites for an overview of their charges and narrow down to four that you can engage. Most have mortgage calculators such as: 

You can use the different quotations to negotiate for a lower interest rate as long as it’s within the Central Bank of Kenya approved rate of 12-14%. 

Afterwards, work out the closing costs for your purchase with the chosen mortgage provider and add them to your budget to assess your true financial position. 

5. Fixating on the House Over the Neighbourhood

Perfect property is much more than the house itself. You don’t want to be in a home that matches all your needs but has surroundings that aren’t ideal. Imagine having to drive over an hour to get to a good hospital. Or your kids (current or future) having a long commute to school every morning.

Solution: Hire an estate agent to help you with the neighbourhood research before settling on a home. They have a vast knowledge of the utilities, schools, zoning regulations and other critical information that will be helpful in deciding whether a neighbourhood is a good fit for you or not. 

Also, take various strolls and visit the neighbourhood on your own at different times of the day. This would be a good time to strike a conversation with your potential neighbours and ask any questions, for example how frequent lights go out and the neighbourhood safety. 

6. Depleting Your Credit Before Final Loan Approval

When applying for financing, your mortgage provider first pre-qualifies you for a loan. This means that they give you an estimate of how much they will lend you based on the information you provided on your finances. 

The next step is pre-approval. They verify the information provided and perform the credit checks. If satisfied, you get a pre-approval letter which is an offer (but not a commitment) to lend you a specific amount of money.

If your financial position changes, they are well within their right to cancel the transaction within a period of 90 days after pre-approval. 

Solution: Do not make large purchases or do anything that will deplete your financial status, e.g. getting into more debt before you get an approval confirmation from your mortgage provider. 

You can use the pre-approval letter to start negotiating for lower prices with a potential seller as this gives you a competitive edge. It shows the seller that you are serious; you can secure a mortgage and are more likely to complete the purchase of the home. 

7. Making Decisions Based on Emotions

Buying your first home is an important step. This is where you will make lasting memories with your family. You might get attached and make decisions based on emotions. 

However, remember this is one of the largest financial investments and recovering from financial mistakes could take a significant amount of time.

A seller’s agent is well aware of the situation. Their aim is to sell for the highest price possible- and might tap into your emotions to serve their client’s best interest. 

Emotional decisions can make you end up buying a home that is way above your budget. 

Solution: Have a strict budget for your home and stick to it. Do not get attached to a home that has not yet been transferred to you. 

Using an estate agent to represent your interest during the process will also help keep you in check. Discuss your ideal home and what you can afford beforehand and your agent will take care of getting a home that matches your needs matched against your finances. 

8. Waiting for the Perfect Home

We understand. You are looking for a home that you will live in for a long time if not forever—so you want one that is perfect. However, expecting to find a home that ticks all your boxes can be unrealistic. 

Waiting for a perfect home could mean passing up good homes in a great location and great pricing. You will also be limiting your options, which could make the buying process longer than necessary. 

As the Kenyan real estate market is also cyclical, you risk waiting until interest rates go higher, or home prices rise. 

Solution: Have a list of your must-haves, deal-breakers and compromises. This will help you to be flexible and keep an open mind. Remember that you also can upgrade your home later. 

You can get a home that matches most of your needs and make improvements later when you are more comfortable financially. 

9. Skipping Home Inspection

As a home inspection is not mandatory for your mortgage application, you might be tempted to skip this, being an additional expense. However, it is a crucial step, especially if you are buying a pre-owned home. 

A home inspection protects you from buying a home that is not worth the asking price or one with structural issues. 

Solution: Hire a professional inspector to pick out faults that you are not able to find, e.g. insulation, plumbing and ventilation issues. 

Make sure to attend the home inspection so that you familiarise yourself with what needs to be attended to. You can have the seller do repairs, negotiate for a lower price or altogether decide to move on to a new property.

10. Underestimating the Costs of Homeownership

Since you may be moving from a rental or living with family to owning a home, your usual costs could go higher. Additionally, there could be costs that were previously taken care of by your landlord or parents.

These include:

  • Higher utility bills
  • Property taxes
  • Homeowners insurance
  • Homeowners association fee
  • Equipment maintenance and repair
  • Outdoor maintenance (e.g. a backyard)
  • Additional furniture to fill more space

Solution: Work with an estate agent who specialises in the neighbourhood. He/she will have information on property taxes, insurance estimate cost and homeowners association requirements. 

When buying a pre-owned home, it’s also wise to ask the seller to give you their utility bills for the last year. This will help you estimate how much it will cost when you move in. 

To Conclude

Now that you know what mistakes to avoid, here is a detailed guide to walk you through each step of buying your home. Getting buyer’s remorse does not have to be part of your journey as a first time home buyer. Be ready to take up the commitment, have a clear understanding of the process and be in a good financial position. 

Jill Abura
Jill is an International Digital Consultant at Ringier AG, spends her time on research on real estate investment and has a special place in her heart for green building.