Buying a home represents the most significant financial decision most people will ever make during their lifetime.
From a person’s first home, which often establishes the foundation for future home purchases, to the purchase of the home where they’ll spend their senior years, there are definite pitfalls to avoid and suggested steps to take to assist one in making the right decisions.
1. Not Getting a Mortgage Pre-Approval
One of the first mistakes people make is not getting pre-approved or pre-qualified by a bank or lending institution.
Sellers and their agents are often skeptical of a prospective buyer’s ability to obtain a mortgage loan when the buyer has not been pre-qualified. When choosing between two comparable offers, or when contemplating countering a buyer’s offer, a seller will always look more favorably upon the pre-qualified buyer.
2. Not Having Your Own REALTOR®
Employing the services of a REALTOR® makes great sense, since navigating through the home purchase process is both complex and fraught with financial dangers. However, as the buyer, you should have your own realtor who will be fully committed to representing your best interests.
The seller’s realtor will often favor the interests of the seller, with an eye to the commission involved. Your agent will be inclined to do a “comparative market analysis”, which will establish property values and selling prices of homes in the area of your targeted purchase.
3. Rushing Into Things
Take your time! It happens all too frequently that people rush into signing a contract to purchase a particular home and then for any number of reasons, regret their hasty decision.
Remember… if you enter into a contract to buy a home, your chances of rescinding that contract are very slim. It doesn’t help that you’ve found another home you prefer, when you’re under contract to make a purchase you’re expected to follow through and buy it.
4. Don’t Overspend Your Budget
In addition to finding a home they like better than the one they’ve contracted to buy, another reason people try to cancel a contract is that they realize too late that they’ve over-purchased.
The mere fact that you can qualify to purchase a particular property doesn’t speak the full story. Being “house poor”, also known as “mortgage poor“, is the pits. Putting the bulk of your earnings into your mortgage payment obviously detracts from your quality of life.
Things you used to enjoy, such as vacation trips, going out to dinner or splurging on an expensive piece of clothing will have to be curtailed.
5. You Wait Too Long for the Perfect Home
Some people have specific requirements for their dream home and unfortunately sometimes wait too long for that home to present itself.
While waiting for utopia, people pass up excellent homes that are good bargains and would fulfill a majority of their demands. Also, in many cases, market prices and mortgage rates continue to rise.
6. Not Exploring the Different Types of Mortgages
The potential buyer should be aware that there are many types of mortgages being offered by lenders; therefore, they should explore all of their options before “locking in.”
Interest only loans allow the buyer to pay only the interest on their mortgage for a period of usually up to five years. This is an attractive option for young buyers who want to establish themselves in a home of their own, but have not reached their full earning potential.
Hopefully and assumedly, at the end of the prescribed 1-5 year period the buyers will be better able to meet full mortgage payments. All other options should be explored as well.
7. Not Getting a Home Inspection
Failing to require a comprehensive home inspection, or relying on the knowledge of a friend, is a penny-wise/pound-foolish thing to do. The relatively minor expense of the full inspection is definitely cost-effective.
The inspection should include a review of electrical system, condition of the roof, plumbing, heating and air conditioning, septic system, water quality, etc. etc. etc. This is a very important process that can save untold heartache in the future.
As a REALTOR®, I can’t imagine too many situations (none) that I wouldn’t recommend that my buyers get a home inspection. Even if there is a recent home inspection, you still can’t be 100% sure that everything you need to know is listed in that agreement. It is better to be safe than sorry.
8. Not Making Sure the Neighborhood Fits Your Lifestyle
When selecting a home, don’t forget that your quality of life in that home extends into the surrounding community.
ho don’t fit into your preferred social structure, you aren’t going to be happy. Be sure that the school system meets with your approval; inquire about the crime rate and consider the quality of the stores and services available in the area.
Your new home can be a showplace, but if it’s surrounded by run down properties and neighbors with run down properties and neighbors who don’t fit into your preferred social structure, you aren’t going to be happy.
Sometimes it’s hard to look into the future, but when buying a home it’s good to think about resale value. Not that this should be the final consideration, but when touring your prospective new home you should look for things that would be a deterrent to another buyer.
9. Buying a Car Right Before Your Financing Goes Through on Your New Home
You might be surprised how excited people get when they have an accepted offer on their dream home! Excitement is great, but for some, they get on a purchasing high and just keep on going. What better way to celebrate a beautiful new house than with a beautiful new car in the driveway? Right?!
Wrong! Well, for most people. You see, when a pre-approval is completed and the bank or mortgage broker tells you that you are approved, there is small print. There is always small print. The small print in pre-approvals are that your credit can not change for the worse. So, it is always best to go car shopping after you purchase your home – otherwise, that dream home may become someone else’s (it happens more often than you think).
10. Review Any Restrictions in Your New Community Association (Common for Condominiums)
Finally, before signing the contract you should be aware of any restrictions imposed by your new community association.
Such restrictions can include: fencing guidelines, parking restrictions (no RV’s in the driveway), no boats in the yard, landscaping requirements, and even certain occupancy restrictions. Blindly buying into a heavily restricted community is a very common mistake.
The ten common buying errors mentioned here are by no means an exhaustive list of things to avoid. Buying a home should be done systematically and carefully.
Checklists are available from reputable REALTORS® and should be consulted and utilized throughout the searching and buying process.