Top Home Buying Mistakes
Buying a home can be a daunting task. It is likely the most expensive purchase that you will ever make. Just one mistake could mean disaster — resulting in a stressful experience and one that may not end with you in the home of your dreams. In order to avoid such an experience, buyers should get to know the most common home buying mistakes.
The top home buying mistakes to avoid:
Going solo: Buying a home is a complex transaction. It should be a team effort. You need to find an experienced REALTOR® that knows the area that you are looking in, a lender with good interest rates and low closing costs, a competent, experienced home inspector, a good insurance agent to provide your homeowner’s insurance policy, insurer, and a title company to conduct the title search and the actual closing. Assemble your team before you start the search for your new dream home.
Love at first sight: Be sure that your home fits your real needs. Buying a home is an emotional process and it may be that the first home for sale that you see is the perfect fit. Just be sure that you are looking past the “perfect” paint colors and the granite counters, to be sure that the home fits your budget and your lifestyle. Be sure the home is in a community and neighborhood you feel comfortable in. Drive around in neighborhoods several times before you buy to check out schools, noise and traffic patterns.
‘Loanless’ shopping: Get pre-approved for a mortgage before you begin looking at homes for sale. This will give you an idea of not only how much you can afford to borrow, but also how much you are comfortable borrowing. It’s also critical to be pre-approved for a mortgage before making an offer, sellers will take you more seriously.
Buying too much home: Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market. Buy more than you can afford and your dream home will become the same nightmare. Analyze all your monthly costs including debts, food, transportation, entertainment, and savings. Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. Don’t forget to budget closing costs, plus moving, redecorating and maintenance. Look ahead and allow for increases in ongoing expenses such as utilities and taxes.
Misplaced trust: You are engaged in what’s likely your most valuable purchase ever. It’s a business transaction. Ask family, friends & co-workers for referrals, but don’t take their word for it. Be sure that the professionals you are working with have experience and your best interests in mind.
Accepting oral agreements: Get it in writing. The rate lock, the home inspection, disclosures, the contract. Always. Should a dispute arise, you’ve got the details documented.
Skipping the fine print: Understand what’s really in any document before signing it. Get documents in advance, take time to read them and ask questions. Get copies of your mortgage and closing papers a few days ahead of closing.
Forgetting or betting on resale: Avoid buying a home that costs 50 percent more than neighboring homes. Reconsider buying the most expensive home on the block. Neighbors’ lower home values will weaken yours. Buy intending to flip your investment only to have the market fail means when it’s time to sell your price may not cover your costs.
Making an unconditional offer: Protect yourself with these contingencies:
1. Mortgage financing: You may be pre-approved but is the house? A formal appraisal confirms — or not — that there is sufficient value in the home to warrant the loan. If the house appraises lower than the sales price, the loan may be declined.
2. Inspection: Never buy an existing or new home without a thorough home inspection. Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
3. Insurance: Confirm you can get adequate insurance coverage. In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.
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