Hi, this is John from Downs Capital and today we’re going to talk about my two top first-time homebuyer mistakes.
I work with a lot of first-time homebuyers, and over the years I’ve seen them make a lot of mistakes. Of course we try to do everything we can to steer you away from making a regretful decision. Sometimes I can. Well, sometimes you’re just going to do what you’re going to do.
But the two things I want you to watch out for are – Mistake No. 1 is putting too much money down. That doesn’t kind of make sense, right? Putting too much money down. If you do, you have a lower mortgage payment and typically better interest rates. So what’s the problem with that? Well, you have to ask yourself two things.
One, do you have that family what-if account that if something happens – a medical event, a car breaks down, kids tuitions – do you have money to fall back onto, just in case those things arise?
Number 2 is try figuring out what else could that money be doing? For instance, it could be invested in something like a stock, or a mutual fund. And maybe the long-term gains on that investment will far outweigh the tax-adjusted mortgage rate that you’re paying. And Mistake No. 2 is not buying enough house. Now, I’m not trying to push everybody out there and say, buy the biggest house you can. That’s not our goal.
Our goal is to make sure that when you do buy a home that you’re buying something that’s sustainable and it really fits your goals not just for today but for two, three, four, five, ten years from now, whatever that is for you and your family.
A lot of people, they don’t slow down to budget based on things like tax savings. You know, a year later they give me a call and say, you know what, John, we can afford more. We want that bigger house. But unfortunately you can’t control markets. Interest rates can be higher and property prices can be higher. Just recently I had a client that was looking at a house for $600,000. But a year later, they wound up going back to look for those same-type houses and they were $750,000. So of course that doesn’t always happen, but it could.
So, don’t just think of your budget. Think about your needs over time. And if you want a bigger house, maybe now’s the best time to buy one. You know, these mistakes happen because you get an idea in your head and then you start shopping based on that idea. And unfortunately most loan officers are trained to give you rate options based on what you asked for and to make those look as attractive as possible, hoping to gain you as a client. And next thing you know, you’ve railroaded yourself down one single path. Now, I don’t want to say no one, but most loan officers are not going to challenge you the way we do at Downs Capital. So try to stay open to considering all options, and be careful that you don’t get yourself stuck.
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