Buying a home is stressful enough, but how do you know if you’re making a smart financial decision too? There are so many things that can go wrong during a home sale, from having a real estate agent who doesn’t care to paying too much for a mediocre home. I’m here to help you avoid the potential pitfalls that come with buying a home. So stay with me!
Here are 10 financial mistakes home buyers make.
Maxing out your loan
Many lenders are willing to give you much more money on your mortgage than you would feel comfortable paying for a home. But you don’t want to end up in a home where you struggle to make the monthly payment when you could have gotten a more modest home at a better price.
Not getting pre-approved
Not thinking about your credit score
Your credit score is going to affect the interest rate you’ll receive on a mortgage, as well as how much money you can qualify for. You’ll want to do everything you can to raise your score if it’s below 600. Making payments on time, using a credit card and paying it back, and paying off a loan will all help to raise your score, which will positively impact your home buying options.
Getting a money pit
Don’t be so focused on getting a great deal on a home that you overlook potential problems. Sometimes homes with low prices have a low price for a reason! You really don’t want to get a home with foundation problems, roof problems or leakage problems. You might think those things will be easy fixes– and you’ll quickly find out how far from the truth that is. Also, don’t buy a home that needs extensive renovations (the kind that make the home unlivable without them) if you aren’t planning to renovate right away. It will make it too hard to live comfortably in the home and if money gets tight, your renovation plans might likely be put on hold.
Not choosing a committed agent
Your real estate agent will be one of the most important people in your buying process. Choosing an agent who doesn’t care about your needs, is only concerned about getting a commission, or makes you feel pressured to buy–will likely not end well. This is not someone you want handling the one of the largest purchases of your life. Really take the time to choose a realtor that is the best fit for you and your needs. You’ll be glad you did!
Not thinking long term
A two bedroom, one bathroom house might be perfect for one person or a couple, but what about if you have kids one day? Or if you want to add pets to your new place? Can you see yourself living there comfortably five years from now? Does it have adequate storage space? Do you like the neighborhood? Are there good schools nearby? You might not be thinking about these things right now, but a home is for the future, so try to think longer than your first year in your new home. Usually you want a home that can accommodate your growth and changes.
Not shopping around for a mortgage
Another mistake home buyers make is not choosing the right kind of loan for them. The standard option is a 25-year fixed rate mortgage, but that’s not your only option. There are also ARM or adjustable rate mortgages that have interest rates that start low and rise over time. If you are planning now to only be in the home for a few years, this could be a great option for you. Also consider FHA and USDA loans, which will help you to put down a lower down payment (thus leaving money in your bank account for savings or other essentials). Talk with your lender about all your options and discuss which one could be the best fit for you.
Not looking for ways to save
If you are a first time home buyer, don’t get so hung up on having all your ‘want’ items that you forego a home that would be a better deal. It’s okay if the home doesn’t have all the upgrades you want at the present time– those are things that could be added later on. Don’t let yourself get talked into luxury when you don’t need it!
Choosing the wrong location
Make sure you like the neighborhood– this will matter more than you think in the long run. If you don’t get along with your neighbors or feel safe in your neighborhood, you’ll be unhappy in your place and look for ways to move sooner. Make sure you choose a location that’s not too far from where you work or from convenient shopping locations. Does your neighborhood have a friendly feel to it? Are the schools adequate? You might be happier in a house in an older neighborhood, near better schools and with better safety ratings.
Not having a home inspection
Some home buyers will choose to forego a home inspection because they don’t want to pay for it. This is not a smart decision. Having a home inspection done on the home helps to mitigate any fears of problems in the near future. It can also uncover issues in the home the seller needs to have resolved before you’ll agree to buy the home. You will sorely regret not having a home inspection if you’re paying for repairs soon after moving into the home.
These ten topics are all financial mistakes that many home buyers can make, if they aren’t careful or informed. Stay up to date on all things real estate by following my blog. Subscribe to get your blog post personally delivered!
Also, please feel free to ask me any questions you might have directly. I’m happy to help!
And what financial mistakes have you maybe made or seen others make when buying their homes? Please be generous in sharing so that we can all help to educate one another!