Buying a home is an important life decision. Here are Ten Costly Home Buyer Mistakes You Want To Avoid.
1. Not checking your credit report and score
You’ve clicked through hundreds of online listings, compared floor plans and square footage, and are eager to jump-start your search. But before you even think of setting foot in an open house, make sure you get a copy of your credit report. The cleaner your credit report and the higher your credit score, the more likely you are to be preapproved for a mortgage at a low interest rate. Review your credit report a few months before you begin your house hunt, and you’ll have time to ensure the facts are correct and dispute mistakes before a mortgage lender checks your credit.
2. Not getting preapproved
After you’ve assessed your credit report, it’s time to establish with a qualified lender how much you can afford. Home buyers need to take the time to get an approval from their lender before looking at homes; this includes getting a credit check and giving their lender a copy of W-2s, pay stubs, and bank and brokerage statements. Getting preapproved can help you save time by looking for homes that you know you can afford instead of lusting after something out of your price range, and it will put you in a better position over another bidder with no preapproval.
3. Not creating a long-term budget
If the economic crisis proved anything, it showed that mortgages were given to people who clearly did not have the means to pay them back. To avoid making this mistake, home buyers should create a budget before even beginning their home search to determine just how much house they can really afford. A good rule of thumb is to devote no more than a third of your monthly household income to housing costs, which include mortgage principal, interest, taxes, and insurance. There are several work sheets available online to help you figure out how your income, debts, and expenses affect what you can afford each month for the next 15 or 30 years.
4. Forgetting about the hidden costs
You grossly underestimated what you can afford to pay each month. You factored in the purchase price of the home but didn’t consider the cost of taxes, insurance, utilities, and fees. There are several hidden costs that first-time home buyers neglect to prepare for. Fees can be anything from the closing costs to appraisal fees, escrow fees, homeowner’s insurance fees, property taxes, and even moving costs. Another factor is the cost of repairs and maintenance. When you’re renting and the furnace goes out, what do you do? You call the landlord! When you own a house, what do you do? You have to fix it yourself.” You may find there are numerous “nickel and dime” things to account for that could add up to a significant chunk of money over time.
5. Not using professional help
Sure, it’s possible to go out and buy a home without the aid of a professional Realtor®, but think about how much time and stress a Realtor® can save you. For starters, Realtors® have access to all the homes on the market through the multiple listing service, or MLS, plus all the ones that are under contract and have been sold. A specialist has time to sift through all of these listings and make the appointments to show you the houses, create comparative market analyses to determine proper pricing, and meet with necessary inspectors. Realtors® also can help buyers traverse a taxing, 70-page legal contract. You want someone who is going to look out for your interests first and foremost. Someone who knows the contracts, who has experience negotiating, and who can walk you through the entire process smoothly—step by step—and make sure you get the house that’s right for you and your family!
6. Picking your Realtor® and lender blindly
One of the mistakes a lot of people make is finding a Realtor® they aren’t comfortable with or picking someone just because they attend the same church or because they know them. Make sure you pick a Realtor® who is right for you versus whether you know them or not.
First-time home buyers or people new to an area are generally more time-consuming than the average buyer and require more attention, you must find a Realtor® who understands your situation and is willing to assist you with your needs in mind A good Realtor® will be friendly and accommodating, show only homes that fit your parameters, and help you with strategies during the bidding process—but never pressure you into something you’re not comfortable with. It’s important that the Realtor® be experienced with buyers, understand their wants and needs, and be able to connect with them well. Similarly, buyers should feel at ease with and have complete confidence in their mortgage lender, and they should fully discuss and understand their financing options with that lender. Don’t apologize for asking questions, there’s a pretty substantial chunk of people who are in really rough straits right now and would not have been had they done their homework and asked questions.
7. Thinking you’ll get everything on your “wish list”
Another mistake people make is being too close-minded while searching for their home, I suggest sitting down before searching for a home and creating a need/want list. Some of the items you might want to include as “must haves” or deal breakers are the towns you’d want to live in, square footage, or accessibility to transportation. The second part of the list would be things you don’t necessarily need but wish to have, such as a garage, new kitchen appliances, or an extra room for an office. As you search for your home, you may realize there are certain parameters you really want or don’t want, understand that a certain amount of flexibility is essential. Your aim is to be able to afford everything you need—as well as some items you want—all while staying within a long-term budget.
8. Not keeping your feelings in check before hiring a home inspector
You’ve already chosen the perfect paint color to match your living room set. But hold on: Before you start picking out accent pillows for your sofa, you need to bring in a home inspector to check the safety of your potential new home. Inspectors will evaluate the structure, construction, and mechanical systems of the home and will give you the approximate price of repairs that may be needed. They will examine everything from the electrical system, water heater, and HVAC system to the foundation and floors. All buyers should find and hire their own inspector—independent of the real estate broker—to ensure there isn’t a conflict of interest. When you make your offer, make sure the seller is aware that your offer is contingent on the house passing inspection. You can also add a clause to the contract stating that the seller will pay up to a certain amount for any repairs required as a result of the inspection.
Providing Solutions Because…Your Move Matters!
Michael L. Brownstead
First Sergeant, U.S. Army (Retired)
ABR, GRI, MRP, SRS, REALTOR
Keller Williams Realty
1002 Raintree Cir., Ste. 100, Allen, TX 75013