Common Mistakes People Commit When Buying a Home
Buying a home is an exhilarating time. More so for the first-time home buyer. But there’s more to buying a home than simply putting money down and signing on the dotted line. There are many homebuyer mistakes that happen that can turn a dream home into a nightmare.
Pre-approved
Before stepping into any potential listing, a new home buyer will want to first visit a bank or other lending organizations. Pre-approval for a mortgage loan is the only place to start. Lending companies are the rational voice that keeps a first-time home buyer from being their last. There really is a limit that a person can spend on a home. Going over that limit will only cause financial ruin down the road; sometimes very quickly.
Putting out all of a person’s finances and facing the reality that there is a limit on what they can spend isn’t glamorous. But being pre-approved for a specific amount will ensure a purchase that is affordable. Some people confuse pre-qualified with pre-approval. They’re not the same. A person may pre-qualify for an amount higher than what they will actually be approved for. Pre-approval is the number that matters. This is the amount home loans will be given for. This is probably one of the biggest homebuyer mistakes made, especially by first-time home buyers, but needs to be done prior to even looking at a new home. Credit scores matter greatly for this and building up a good one prior to considering purchasing a home makes a difference.
Down Payment
Having a decent down payment on a new home is essential, and one homeowner mistake that is commonly misunderstood. A minimum of 10% is required, but shouldn’t be the goal. Other factors that come into play when buying a home will increase the actual amount needed to close on a house. Points and closing costs, as well as inspection fees, mortgage insurance, homeowner’s insurance, and property taxes, will increase the down payment significantly. Then there are the other costs involved such as moving costs that won’t even be counted in the final sale.
Budgeting for 20% and actually putting 15% down will help to cover the other costs that will be there at the final sale. Higher down payments will decrease the mortgage loan needed and allow for additional funds to be placed in a savings account for other homeowner costs. These can and will consist of necessary home maintenance such as a new furnace or hot water tank. It is recommended that a new home buyer put aside 1-2% of their mortgage payment yearly to cover the costs of maintaining a home.
Home Inspections
Many people think that home inspections are unnecessary. They’ve looked over everything and have found a few minor things that they can easily take care of. But home inspections are vital to knowing what a person will get with their new home. Inspectors are trained to look for problems and will find things that won’t be seen by a star-struck new home shopper. Many times this can be a cost transferred to the seller, but it’s usually the buyer’s responsibility. It’s an investment that is well worth it and could save thousands of dollars. Some problems can be negotiated into the selling price of the house, bringing the cost down.
First-time home buyers should never skip this step. Since they’ve never owned a home before, finding problems is not their area of expertise. Inspections should be done by an independent inspector. It may be thought of as a kind gesture by the seller to have their inspector come in, but he is working for the seller. Hiring an independent inspector will give an unbiased and accurate account of any and all problems.
Buying Agent vs. Selling Agent
Typically, when a person is shown a home it is done so by the selling agent. This is the person who is working for the house seller. Their job is to sell the house. Misunderstanding this role is a typical homebuyer mistake. To receive accurate value for a home, having a buyer agent makes the difference. These agents work for the buyer to help negotiate on behalf of the buyer. Too often this small, yet important detail is misunderstood. To help understand the importance of this role, some people have referenced it to a divorce. “If you were getting a divorce, you wouldn’t go to your spouse’s lawyer for advice, would you?” The same thinking can be applied here.
Going it alone-Don’t Do It
Home buyers, especially first-time home buyers, try to cut costs to save money wherever they can. They do tons of research, study the trends and think they’ve got all the knowledge necessary to make their new home purchase by themselves. This couldn’t be farther from the truth. Having a financial advisor, a buying agent, and a lawyer are all necessary people to have as part of a team to make sure everything is done right. A team of people working to help make one of the biggest purchases a person will ever make is essential. The knowledge and expertise brought to the table by these individuals will provide value and fairness during the entire process. Agents will know specific things to look for and to ask about.
Financial advisors will break down the numbers to assure all areas of owning a home are covered. Lawyers understand the terminology and read the fine print on a contract to make sure everything is in the buyer’s best interest. These upfront costs will save thousands of dollars in the end and will actually make the home buying process enjoyable long after the sale is done. Buying a home is one of the largest investments anyone will make. Applying a team of experts to make sure the process goes smoothly, from approval of the mortgage loan to the final turn-over of the keys is essential.
There are many things that home shoppers don’t think of when considering buying a home. These common homebuyer mistakes can be easily avoided with just a little upfront thinking. By taking just a few things into consideration, the dream of homeownership can be a sweet reality.
