Dave Ramsey Blog: 5 Big-Time Mistakes First-Time Homebuyers Make

Millions of Americans don’t ever get to see their dreams of homeownership come true — but millions do. Zillow’s 2023 Consumer Housing Trends Report found that first-time homebuyers now make up 50% of all homebuyers, up from 45% in 2022 and up from 37% in 2021.

Buying your first home is an astounding accomplishment, but this landmark achievement is far from risk-free. Many first-time homebuyers get in over the heads during the process of purchasing and can get into serious financial hot water. The team at Ramsey Solutions, a site founded by finance expert and top money influencer Dave Ramsey, posted a blog in August laying out some big mistakes first-time homebuyers may make .

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Money mistakes the super wealthy never make - that you might be doing now.

Underestimating All the Costs Associated With Owning a Home

When you’re searching for a house on, say, Zillow or Redfin, you may only be looking at the big print like the asking price. But have you considered all the financial fine print that comes with homeownership? Costs go well beyond a home’s purchase price.

“After buying a house, you’ll have to pay certain bills as long as you live there — like property taxes and HOA fees,” the Ramsey Solutions post said. “Plus, your utility bill will likely go up if you’re upsizing from an apartment.”

You’ll also need to factor in the cost of a home warranty (this can save you money if a major appliance breaks down) and routine maintenance such as landscaping.

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Not Putting Down a Big Enough Down Payment

The typical down payment on a house for a first-time homebuyer is about 8% of the home price, according to data available from the National Association of Realtors in late 2023, as reported by Rocket Mortgage, but you can often get away with putting down far less. Don’t be too frugal here; pay as much as you can upfront.

“A small down payment leads to bigger monthly payments and more debt overall,” Ramsey Solutions wrote.

Aim to put down at least 20% of the home price as your down payment.

Going Solo: Without a Real Estate Agent

It’s tempting to go it alone and work without a real estate agent — especially if the home seller will not cover all the associated fees — but this is playing with fire. Real estate agents are professionals that can actually help you save money in the long run.

For example, they can help you negotiate the home price and give you up-to-date intel on home prices in your desired area, so you can be sure you’re not overpaying.

It’s also best to put some effort into choosing which real estate agent you will work with.

“Try interviewing at least three agents, then pick the one you’re most comfortable with,” the Ramsey Solutions team wrote. “You don’t want to put such a big transaction in the hands of someone who acts like a slimy used-car salesman — or your Aunt Kim’s neighbor Chuck, who just got his real estate license.”

Foregoing an Inspection

Once a seller accepts an offer on a home, you have the right to do an inspection of the property. Absolutely do not skip this. Though it costs a few to several hundred dollars, it’s 100% worth the money. A professional inspector will be able to see problems that may be hidden to the eye. For example, if there is foundational damage, you need to know this before you commit to the purchase and only a thorough inspection will reveal this.

“If the inspection turns up anything wacky, you can decide if you want to buy the home as is, negotiate with the seller to fix problems, reduce the price or even walk away from the deal,” the Ramsey Solutions team wrote. “But if you already bought the place? You’re likely stuck with it.”

Taking On Debt To Close

If closing on a house means taking on debt to cover all expenses, you’re making a mistake. Ensure that you have enough in cash not only for the down payment, but for all the closing costs that go into buying a home. The sweet milestone of homeownership will quickly sour if it means you’ve just buried yourself in new credit card debt to reach it.

This article originally appeared on GOBankingRates.com : Dave Ramsey Blog: 5 Big-Time Mistakes First-Time Homebuyers Make