You are looking to buy your first house, and you are ready to jump into the process headfirst. But before you do, we must caution you: the home buying process is filled with drawbacks.
As such, before you begin your journey, you are advised to brush up on the potential dangers out there. Need a little help? Then you are in the right place.
Without further ado, here are 9 common home-buying mistakes and how to avoid them.
1. Picking the Wrong Mortgage
The vast majority of home buyers buy their homes with mortgages. What you might not know, however, is that not all mortgages are created equal. There is most certainly such a thing as picking the wrong mortgage.
For instance, you might be tempted to take an adjusted rate mortgage due to the fact that its current interest rate is lower than the interest rate of a fixed-rate mortgage. While this could work out for you, it could also end up costing you substantial amounts of money. After all, adjusted rate mortgages fluctuate over time.
In another scenario, you might choose a USDA or FHA mortgage instead of a conventional mortgage, despite the fact that a conventional loan would actually have the better choice for you. Regardless, the type of mortgage you choose matters. In fact, over time, it can cost you tens of thousands of dollars.
As such, when looking for a mortgage, you are advised to utilize the help of a mortgage broker. He or she will help you find all available options and then will help to determine which will best suit your situation.
2. Spending Too Much
When you get pre-approved for a mortgage, you are bound to be approved for much more than you can reasonably afford. In some cases, home buyers are approved for as much as 6 times the size of their yearly income, and, unfortunately, some home buyers actually end up using it all.
In the vast majority of cases, this is a massive mistake. Sure, you might be able to make the payments initially, but at what cost?
At the very best, you are scraping by, not able to devote any money to other parts of your life. At worst, you have lost your job and no longer stand any legitimate chance of making your monthly payments.
Ideally, you will spend no more than 3 1/2 times your yearly income on your housing. So, if you make $70,000 a year, you should not get a mortgage any bigger than $245,000. This cost includes not only the cost of the house, but property taxes, home insurance, and private mortgage insurance.
Generally speaking, you should keep your housing costs to less than 28% of your monthly income. At the same time, your total monthly debt payments (mortgage + car payments + college loans + credit card debt + other expenses) should not exceed 36% of your monthly income.
3. Failing to Inspect the Home Prior to Purchase
Perhaps the biggest mistake that homebuyers make is failing to inspect the home prior to the purchase. While a home may look sound on the surface, there could be a number of problems lurking underneath. These problems could not only cost you a lot of effort but a lot of money as well.
Unless you are in a market in which houses get sold within a matter of hours, you need to bring a professional in for an inspection. He or she will check the entirety of the house, ensuring that its foundation is solid, that its HVAC system is still up to snuff, that its electrical system is up to date, and etc.
Yes, a professional inspection costs a little money, usually between $300 and $400. But that is a small price to pay that can save you tens of thousands of dollars in the long run. It is absolutely worth it each and every time.
4. Underestimating All of the Costs Associated With a Home Purchase
Often when a person is buying a home, he or she thinks only of the home's sale price. Simply put, in the grand scheme of things, this price alone means nothing.
Why? Because there are a number of other costs that you are going to have to worry about as well. These costs include but are not limited to property taxes, home insurance, private mortgage insurance, loan application fees, moving costs, turn-on fees, and general closing fees.
You are also going to want to account for maintenance costs, which could start adding up sooner rather than later. For instance, if your air conditioner dies, you are going to have to spend several thousands of dollars on a new one.
And do not forget about utilities. The bigger and less insulated the home is, the more you are going to spend on gas and electricity.
5. Waiting on the Market to Change
There is always talk of the real estate bubble bursting; that if you just wait another year, the tides will turn and the costs of available houses will drop substantially. The problem with this is that it is all speculation. Sure, the prices could drop, or they could stay the same, or—even worse—they could go up substantially.
See, the real estate market is volatile. It is affected by a variety of factors, thus making it one of the most unpredictable markets in existence. Betting on the real estate market is almost always a shot in the dark, one that often ends up hindering you much more than it benefits you.
So, what does this all mean? It means that, if you are ready to buy, buy now. Do not wait to see what the future brings. Start making payments and start building up equity.
6. Giving Away Your Level of Interest
Let's say you are checking out a home and you are absolutely smitten with it. You are almost falling over yourself checking it out and you cannot stop talking about how great it is. While this is truly understandable, it is also a huge mistake.
Letting the seller know that you are deeply interested in his or her house gives him or her all of the leverage in the transaction. Now, you have essentially no bargaining power, leaving you at the mercy of the seller.
It is best to keep your feelings about the house under wraps until the transaction has been completed. Obviously, you will need to indicate that you want the house, but you should not indicate that you are in love with the house.
7. Buying Out of Desperation
Another mistake that you will see in home buying is buying a house out of desperation. This typically occurs after several deals have already fallen through, and when the buyer just wants to get the process over with.
The problem, of course, is that it leaves you saddled with a mortgage on a home that you do not really even like. Now, you are going to be forced to make payments for at least the next few years, as it is far too expensive to sell this early on into the lease.
What should you do instead? The answer is as simple as staying patient. Keep a clear mind and only bid on houses that you actually like.
8. Failing to Utilize the Assistance of a Real Estate Agent
Buying a house is a complicated process. There is more to it than seeing a home for sale, taking a look at it, and putting in a bid. In general, the process is much more complicated.
Some of the things that an agent can do to help a buyer include negotiating on price, inquiring about repairs, closing the sale, finding an inspector, and, of course, finding viable homes. There is also the issue of paperwork, which is both ample and complicated; a real estate agent will handle it all.
Yes, it is possible to buy a home without the help of a real estate agent, but, as far as we are concerned, it is not worth the savings. Unless you can dedicate your life fully to this endeavor, you are going to want a skilled and experienced agent on your side.
9. Not Thinking on the Grand Scale
Many times, when a person is buying a home, he or she is thinking in terms of one or two attributes.
For instance, a person might focus on cost, and opt for a home that is $15,000 cheaper, but which does not quite meet his or her needs. Or, a person might choose a home that is perfectly suited to his or her expectations, but which is not in a good school district.
The fact of the matter is that, when purchasing a home, you need to consider everything that that purchase will affect. Choosing the right home is a balancing act in which all characteristics are weighed against one another. The key is to balance all of these characteristics in your favor.
These Home-Buying Mistakes Can Land You in a Lot of Hot Water
The home buying mistakes reviewed above can land you in a lot of hot water. As such, you are advised to avoid them like the plague. Be deliberate with your actions throughout the entirety of the process, and you should end up making a solid selection.
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