Few would argue that buying your first home is a huge financial decision. The process of buying a home is complex, and it takes a good amount of time working out all the details…much of which is outside of your direct control.
Unfortunately, many home buyers make mistakes that can cost them time, money, and even their dream home.
But, as they say, “knowledge is power”, so when you know the common mistakes that people make when buying a home, you’ll know what to look for and have a plan for avoiding those mistakes.
1. Failing to get pre-approved
This is a common mistake that homebuyers make. They fail to get pre-approved for a mortgage before they start looking for a home.
A mortgage pre-approval is a lender’s conditional promise to approve you for a loan, provided that you continue to meet their requirements by the time you close on the house.
Examples of documents the lender will ask for include:
- ⬥ drivers’ license or other proof of identity
- ⬥ bank statements
- ⬥ income proof such as W2s, and pay stubs
A hard inquiry will appear on your credit record as a result of the lender’s credit check, which will also be conducted.
Getting pre-approved gives you an idea of how much you can afford to spend on a home, which helps you narrow down your search.
If you include a pre-approval letter with your purchase offer, the seller will be more inclined to accept it because it increases the likelihood that financing will be approved.
In addition, because the lender already has the bulk of the needed information it can speed up the closing process.
Consequences of not getting pre-approved can include wasted time and effort looking at homes that are out of your price range, missing out on your dream home to someone who is pre-approved, or not being able to secure a mortgage in time to close on the home you want.
To avoid this mistake, start by researching different mortgage lenders to find the best fit for your needs. Then, apply for pre-approval and have your financial documents ready.
Being pre-approved will give you a competitive advantage in a seller’s market.
2. Skipping research on where you could be living
Another mistake that many homebuyers make is not doing enough research on the neighborhood and community where they are looking to buy.
It’s important to consider factors like the quality of schools, crime rates, property values, and proximity to amenities like shops and restaurants.
Consequences of not researching can include ending up in a neighborhood that doesn’t fit your lifestyle or values, facing unexpected expenses, or being unhappy with your choice of home.
To avoid this mistake, start by doing some online research. Check out local news websites and neighborhood-specific forums to get an idea of the area’s vibe.
Visit the neighborhood at different times of the day to see what it’s like during peak hours and on weekends. And don’t be afraid to ask the seller or your real estate agent about the neighborhood and the community.
3. Not using an agent
One of the most critical mistakes a homebuyer can make is not hiring a qualified and experienced real estate agent. An agent can help you navigate the home buying process, negotiate a fair price, and advocate for your interests.
Consequences of not having an agent can include missing out on opportunities, paying too much for a home, or buying a home with hidden defects.
To avoid this mistake, choose an agent who has experience in the area where you want to buy and who has a good track record. Ask for referrals from family and friends, and check online reviews to find a reputable agent.
Don’t be afraid to ask questions about the agent’s experience and approach, and make sure you feel comfortable with them before signing a contract.
4. Going over your budget
Another common mistake that homebuyers make is overextending their budget.
Buying a home is a big financial commitment, and it’s important to make sure you can afford the mortgage payments, property taxes, and other expenses that come with homeownership.
Consequences of overextending can include falling behind on payments, having to sell the home before you’re ready, or being unable to cover unexpected expenses.
To avoid this mistake, start by setting a realistic budget based on your income, expenses, and savings. Don’t forget to factor in closing costs, property taxes, and ongoing maintenance costs. And be prepared to adjust your budget if needed to stay within your means.
5. Forgoing a home inspection
Skipping a home inspection is another common mistake that many homebuyers make.
A home inspection is a professional assessment of a property’s condition, including its structure, systems, and overall safety. It can uncover hidden defects that could be costly or even dangerous if not addressed.
Consequences of skipping a home inspection can include unexpected repairs and expenses, safety hazards, and potential legal issues if defects are discovered after the purchase.
To avoid this mistake, always include a home inspection contingency in your purchase contract. Hire a reputable and licensed home inspector to conduct a thorough inspection of the property.
Be present during the inspection so you can ask questions and get a better understanding of the home’s condition.
6. Buying on emotion
Buying a home is an emotional experience, and it’s easy to get caught up in the excitement of finding your dream home.
However, making emotional decisions can lead to mistakes that could cost you in the long run.
Consequences of making emotional decisions can include overspending, settling for a home that doesn’t meet your needs, or missing out on a better opportunity.
To avoid this mistake, stay objective, focusing on your needs and budget. Make a list of the must-have features you need in a home and stick to it.
Look past the “window dressing”.
In other words, don’t be swayed by cosmetic features or a seller’s emotional appeal. Trust your instincts and take the time to weigh your options before making a decision.
7. Failing to educate yourself on the process of buying a home
The homebuying process is complex and can be overwhelming for first-time buyers. Not understanding the process can lead to mistakes and missed opportunities.
Consequences of not understanding the process can include missed deadlines, incomplete paperwork, or not being aware of your rights as a buyer.
To avoid this mistake, take the time to educate yourself on the homebuying process. Research the steps involved and ask questions of your real estate agent and mortgage lender. Don’t be afraid to ask for clarification or guidance if you’re unsure about something.
Finally, remember that buying a home is a significant financial and emotional investment. To avoid common mistakes, it’s essential to do your research, have a clear understanding of your budget, and work with experienced professionals.
With the right preparation and guidance, you can make a confident and informed decision and find the home of your dreams.