First-Time Home Buyer's Guide

Looking back, many a homeowner feels he or she made mistakes as a first-time home buyer. The most common mistakes can be prevented by proper planning. Namely, many first time home buyers do not have a good conception of budget and needs in their first home. Some may be too conservative, sacrificing key needs to stay within a budget well below their true buying power. Others will have unrealistic expectations, stretching their budget beyond what they can afford. By understanding your true buying power and necessary priorities, you can avoid these pitfalls.

Budgeting Based on Mortgage Payments

Do not think of a home's price simply in terms of the asking price. Many first-time home buyers make this mistake; they seek to learn what other individuals in their same income bracket "spend" on a home, and they base their decision on this number. In reality, the total cost of your home will have a much smaller impact on you than your monthly payments. When you seek mortgage pre-approval, focus on a reasonable monthly payment. Remember: you will have tax, insurance and potential homeowners' association fees on top of this payment each month.

Finding Priorities First

First-time home buyers often make the mistake of "falling in love" with a home when they walk in. While you should desire a good feeling about the home you purchase, it is more important that the home meet your basic needs. Make a list of the items you cannot compromise on. This list should include the numbers of bedrooms and bathrooms and the square footage and location. If there are any other items you feel you cannot compromise on, such as a garage, then note this as well. A second list of desired features can also be used to help guide your decision. This may include items like "new construction" or "updated kitchen."

Negotiating with Options

When you have found a home that meets your needs in your price range, it is time to negotiate a sale. There is no golden rule for the best way to negotiate a home sale. There are, however, many options available that you should consider. These options allow you to negotiate for assistance such as seller-paid closing costs, furniture or window treatments included, allowance for new appliances or repairs as needed, or even a stipend to finish an unfinished basement. If there are a few things about the home you would like to change, try to negotiate for these items instead of just dropping the price of the home.

Considering Return on Investment

Your first property should give you the profit you need to move into an improved home at some point in the future. This will happen only if you generate a good return on your investment. Purchasing a home that has already been updated to the maximum degree may leave you with little room for growth. Instead, many first-time home buyers aim to buy a home that is sufficient but needs some updates. This gives them room to personalize the home as well as earn a return on investments they make in the property.