Buying your first home creates a special chapter in your life story. However, it’s not uncommon for newbie homebuyers to make a few mistakes along their journey to home ownership. Learn some of the mistakes first time homebuyers should avoid, especially in NYC.
5 Mistakes First Time Homebuyers Should Avoid in NYC
1. Looking before they’re ready
What’s the harm in checking out an open house this weekend? Maybe more than you think. Whether you’re not ready simply because you don’t have the cash or because you don’t have a team in place, looking at homes before you’re ready can leave you disappointed or with unrealistic expectations.
Instead of crashing open houses, spend your free time preparing financial documents, discussing your amenity wish list with your realtor, or getting a few different mortgage quotes. Buying a home in NYC is no easy feat. For many first-time homebuyers, the process can take several months, if not years. This can be especially true if they skip crucial steps of the process.
Let’s be honest. Browsing homes is the fun part. And in some cases, seeing your dream home in real life can serve up some strong motivation. But if you know there are other tasks to be done, you’re only putting your journey to homeownership on the slow track.
2. Not interviewing their team
It’s important to have a team in place before going house hunting. But not just any team will do. While referrals can be helpful in finding a mortgage broker, realtor, insurance broker, real estate attorney, or financial advisor, making sure each member of your team has the right experience for your unique situation is important.
Is your realtor familiar with your target location? Do they tend to work more with co-ops, even though you’re interested in a condo? Has your insurance broker explained the basics of condo or co-op insurance? Does your financial advisor understand your financial goals when buying a home?
This is a crucial step when it comes to mortgage brokers. You should never accept the first offer that comes your way. Speak to several brokers and compare their offers. While you want to make sure you secure a great rate, you also want a broker who will act in your best interest. Remember, the amount you’re approved for isn’t always the amount you can afford. An honest broker will make sure you don’t get in over your head financially.
3. Moving too quickly or emotionally
Buying a house is an exciting time. But this doesn’t mean plenty of thought shouldn’t go into the final decision. You might come across the perfect home on your first try. But with nothing else to compare it to, you might be missing out on a better unit or unknowingly overpay for the space. It’s true that units do move quickly in the city. You won’t always have time to sleep on it. But taking a walk around the block (and getting a feel for the neighborhood) is a great way to make sure you’re not acting impulsively.
Emotions can also come into play when house hunting. Are you really in love with the unit or does it seem better than it really is because you grew up down the street? Is the updated kitchen making it easy to ignore the poorly maintained building? This is where it helps to have a realtor with your best interest in mind. They’ll be able to help you separate emotion from fact, so you don’t make a purchase you’ll end up regretting.
4. Not understanding their financial commitment
Many first-time home buyers decide if they can afford a home simply by looking at the asking price. But there are several other financial commitments to consider before entering a contract.
For example, can you meet the board’s requirement for a down payment? There are also one-time fees to consider, such as closing costs. Due to the high price of NYC condos and co-ops, closing costs can quickly add up (for a $650,000 co-op, you could pay $26,000 in closing costs at 4 percent).
Finally, there are additional recurring costs to consider, such as maintenance fees and insurance. Depleting your savings to handle all of these costs is a financial mistake you’ll regret. Being house poor for years while you bounce back is no way to enjoy your investment either. Work with a financial advisor throughout the house buying process to make sure you’re not biting off more than you can financially chew.
5. Failing to insure their investment
One of the most common mistakes we see first time homebuyers in NYC make is failing to properly insure their investment. Most lenders require an insurance policy be in place (or at least promised) before closing. But even if a policy earns their approval, it may not provide the coverage you need.
Where is your home located? Is it in a coastal area? No matter the location, you should have a very specific conversation with your insurance broker about flood insurance. If you buy in a flood zone, you may be legally required to have flood insurance. Don’t find yourself on the wrong side of the law when it comes to this type of coverage.
There are a few other factors to keep in mind when insuring your new home. Your quoted policy amount isn’t locked in until the contract is signed so make sure there’s a little wiggle room in your budget in case the overall cost of your policy is higher than expected.
Also, make sure your closing date matches your insurance proposal. If it’s scheduled to go into effect a week after closing and something happens before then, you’ll be fully responsible for any damages.
Finally, always speak with more than one insurance broker to make sure you’re purchasing a policy that fits your budget and unique property needs.
Are you ready?
Buying a house should be a fun and exciting experience. But you also need to be defensive and proactive throughout the process. Have a strong and supportive team in place, fully understand your finances, and be prepared to insure your new home correctly, even if it means paying a few extra dollars a month.
Hopefully our list of mistakes first time homebuyers should avoid has left you with more confidence and direction as you prepare to take on the New York real estate market.