When it comes to buying a home, there are all sorts of things that can trip you up, whether it’s paying too much, getting the wrong type of mortgage or neglecting to budget properly for unexpected home repairs. Whether you’re a first-time home buyer or you’re looking for your empty-nester home, most buyers will make some kind of mistake.
(I bought a home next to a very active train track. I knew it was there but thought, “It can’t be that bad!” It was.)
Here’s a list of some of the most common mistakes. Read through them carefully so that we can’t come back and say “I told you so!”
- Working with a shady lender. Always go with someone you trust completely — your credit union, a lender recommended by a friend or family member or one you’ve used in the past. Borrowing too much money. Don’t max out your budget with your house payment. Always make room for the unexpected: job loss, kids, major repairs, and life in general. It’s smart to keep your monthly payments to no more than 28% of your income.
- Deciding not to get prequalified for your mortgage. Don’t put the cart before the horse. Talk to a lender before you start house hunting so you can correct any errors on your credit report, take some time to save more money for your down payment, get a better job with a higher income, etc. The further you plan ahead, the better.
- Ignoring your credit report and score. This might be the single most important document in terms of your mortgage application. The higher your score, the better chance you’ll have of qualifying for the lowest rates and fees, which can potentially save you thousands of dollars. Generally, interest rates and fees go up for every 20-point decrease in your score. If your report isn’t correct, get it fixed before you go to apply for a mortgage.
- Choosing the wrong mortgage. Too many people just automatically get a 30-year fixed and they shouldn’t. Look at your particular situation: Are you going to relocate in five years? Can you afford a larger monthly payment? Are you willing to refinance every few years? Asking these kinds of questions will help determine which mortgage makes the most financial sense.
- Forgetting about resale. Some day you’re probably going to sell your new home, so consider what the majority of people look for in a home: big yard, extra bathrooms, public transportation, good schools, etc., even if they aren’t at the top of your list. You don’t want to be stuck with a home you can’t sell or have to take a loss on to get rid of it.
- Skipping the home inspection. Any good real estate agent should make sure you put a home inspection as a contingency in your offer. With good reason: you need to know if there’s anything wrong with the home, what’s easily fixable and what isn’t. Don’t skip the home inspection unless you’re willing to accept the home no matter what might be wrong.
- Falling in love too quickly. Seriously. But not with a person, with a home. If you do, you’re likely to ignore any red flags and faults there might be. It helps to bring a friend or relative along on your house hunt who can be a little more objective. It’s also wise to revisit the home a couple of times, at different times of the day, to get a more complete picture of the home.
Take your time. Plan carefully. Think long term. Remember that this is probably the largest purchase you’ll ever make and approach it seriously and respectfully. If you do, chances are you’ll have a great experience and will love your new home.
Made any mistakes in a home purchase? Share your tips in the comments below!