Since buying a home is one of the biggest and most complicated purchases you’ll ever make, it’s possible you might make a mistake during your transaction. To reduce mistakes, minimize buyer’s remorse, and ultimately, love the home you purchase, try to avoid these common homebuyer mistakes listed below.
- Looking for a Home Before Consulting a Mortgage Lender
There are many reasons you should apply for a mortgage before looking at homes. First, it helps you set a price range for homes you can afford. Second, it provides proof that you have the financial ability to buy a home. Finally, it signals to sellers and buyer agents that you’re serious about purchasing and not just browsing. Build a close relationship with your lender – you’ll be working with them frequently.
- Buying More House than You Can Afford or Maintain
When a lender sets and approves a loan, they don’t factor in your living expenses like groceries, utilities, or insurance. Additionally, larger homes have higher monthly utility, maintenance, and repair costs, so you could quickly run out of money by omitting these costs from your monthly expenses.
- Mismanaging Your Finances and/or Credit Before Closing
Changing or quitting your job, purchasing expensive products like a car or boat, opening an additional line of credit, hard credit checks, and co-signing a loan for someone else are just a few ways you can jeopardize a final loan approval before closing on a home. To ensure you have the best experience, don’t make any major changes, and spend money conservatively throughout the buying process.
- Overlooking Government Loan Options and Regulations
A conventional loan isn’t the only option for financing a home purchase. Homebuyers with a small amount of savings but good credit can apply for a home loan from government agencies like the Federal Housing Administration (FHA) or the US Department of Veteran Affairs (VA). You should also be aware of any local regulations updates that impact homeowners like increasing property taxes.
- Underestimating the Total Costs of Homeownership
Repairs, home improvements, property taxes, landscaping, utilities, Homeowners Association (HOA) dues, homeowner’s insurance, and furniture are the most common expenses that homebuyers don’t factor into homeownership. These expenses can add up quickly, causing homebuyers to go into debt. Create a list of your possible expenses and research the average rates for your desired locations.
- Not Budgeting for Closing Costs
In addition to the down payment, you must also plan to pay closing costs for your home purchase. These can be property-related like appraisal and home inspection fees as well as title search and insurance. Closing costs can also be mortgage-related like lender fees, credit reports, application fees, and other local fees – to name a few. To properly plan for closing costs, consult your agent and lender.
- Making too Small of a Down Payment
Take time to save up for at least a 20% down payment or as much as possible. You might feel like you are saving money by paying a smaller down payment, but you could pay more in the long run due to borrowing a larger loan and paying more in interest.
- Only Focusing on the Home
Your home purchase includes more than just the home, it also includes the yard, the neighbors, the neighborhood, vehicle traffic, the amount of travel for a commute to work, the school district, and local regulations – some of which can influence the potential value of your home. Do your research, investigate the neighborhood, and get as much information about the surrounding area as you can.
You can depend on your Realtor to provide professional advice that is in your best interest. If you find your agent is only focusing on selling you a house, you may want to consult another real estate agent or consultant to make sure your interests are being protected.
The last article in the series is How Mortgage Loans Work.