Buying a home is an exciting and often expensive process. Prepare yourself well by learning about several common home-buying mistakes you’ll want to avoid. Below, we’ll explore how a little intentionality and research can help you minimize hiccups as you buy your dream home.
10 Home Buying Mistakes to Avoid
1. Looking for Homes Before Prequalifying for a Loan
If you’re ready to look for your next home, don’t hit the internet listings quite yet. First, you need to get prequalified for a loan. That way, you’ll know how much home you can afford and won’t waste time looking at homes outside your budget. Be sure to talk to multiple banks to secure the best offer. Start with your personal bank to see if they offer any discounts for existing customers.
More often than not, real estate agents won’t be willing to start showing homes unless you’ve qualified for a mortgage in that price range. Sellers don’t want people walking through their home who cannot potentially purchase the home, and buyer agents try to minimize their time wasted with tire kickers.
If you are a serious buyer, prequalification is a necessity and typically takes less than an hour to get.
2. Not Making a Budget
The mortgage is only one consideration when determining what home you can afford to purchase. Review your current income, expenses, and anticipated expenses associated with owning a new home. While these expenses vary from home to home and location to location, they still need to be accounted for as best as you can:
- Monthly mortgage payment
- Monthly or yearly homeowners insurance payments
- Property taxes
- Property maintenance—landscaping, snow removal, etc.
- HOA fees
- Utilities—trash, sewer, electric, heat, internet, cable, etc.
- Furniture and home decor
- Maintenance and repairs
3. Choosing Just Any Real Estate Agent
A home is often the most expensive purchase an individual makes. Don’t entrust just any realtor to help you with your purchase. Look for real estate agents with experience in your area with time available to dedicate to your search. When buying a home, the seller typically pays realtor fees, so don’t let the “cost” of a realtor deter you.
Purchasing a home may be the largest financial transaction you may have in your life. Make sure that you hire a professional with experience, and someone you have good conversations with and feel good about. Part of good home-buying etiquette is qualifying for the home you are visiting.
4. Waiving the Home Inspection
In hot real estate markets, some buyers waive the inspection contingency to stand a chance at buying their dream home. Doing so can be a costly mistake. When you waive the inspection contingency, you accept the house “as-is.” You can’t use the findings of an inspection to negotiate repairs or walk away from the contract since you are locked in. There is little motivation for sellers to offer anything if you discover something unruly.
5. Spending All of Your Savings on a Down Payment
Avoid pouring all of your hard-earned savings into your down payment. Purchasing a home comes with other costs. For example, renting a moving truck, hiring movers, buying new appliances, repainting your new home, or redoing floors before moving in. If you’re trying to sell your current home, you could face other expenses. These may include repairs, updates, or a place to live between selling your home and moving into your next one. Make sure to buy a house that you can actually afford.
6. Ignoring First-Time Homebuyer Programs
First-time homebuyer programs make it easier for people to buy a home. You might be surprised to learn how much money—or time—you could save by applying for one of these programs. Popular first-time homebuyer programs include:
FHA Loans: The Federal Housing Administration insures private loans to help first-time (and repeat) homebuyers with lower credit scores or smaller down payments secure financing. Down payments are as low as 3.5 percent.
VA Home Loans: A government-backed program for veterans and qualifying surviving spouses that provides loans with no down payment required, competitive interest rates, limited closing costs, and no Private Mortgage Insurance (PMI).
USDA Loans: A government-backed program that provides no downpayment single-family housing direct home loans to low-income families in rural areas.
Good Neighbor Next Door: A program sponsored by the Department of Housing and Urban Development (HUD) that helps teachers, EMTs, firefighters, and law enforcement officers purchase select HUD properties for 50 percent off.
HomePath Ready Buyer Program: A Fannie Mae program that offers foreclosed properties for as little as 3 percent down with the potential to receive up to 3 percent of your closing costs back, too.
7. Skipping the Appraisal
Most loan companies require an appraisal. After all, they want to ensure that you’re not spending more on the home than it’s worth. However, even if you’re making a cash offer on a home, it’s still a good idea to get a home appraisal. Make sure that you’re getting your money’s worth and not overpaying for a property.
If an appraisal comes in lower than your contracted price, you can often negotiate with the seller to reduce the purchase price.
8. Not Researching the Location
Your new home is more than just the physical property you’re purchasing. It’s also the location you’ll be living in for the foreseeable future. Homeowners stay in their homes for 13 years on average.
Make sure that you like the area. Consider the neighborhood, its walkability, parking availability, and nearby public places like libraries, community pools, and parks. If you’re moving into an HOA community, make sure you understand the community guidelines, costs, and community member amenities. If you have school-aged children or plan to have children, consider the schools they would attend if you moved there.
You should also evaluate your commute time to work, stores, and the house of worship you may wish to attend. You might love the home, but if it’s far from the places you frequent, you might not love living there.
9. Taking on Too Big of a Project
While fixer-uppers are great for people with the skills or money to renovate them, they aren’t for everyone. Take an honest assessment of your ability to pay for renovations or to do renovations yourself before taking on a huge fixer-upper project. If you’d need to shell out $30,000+ for renovations, you might be better off looking for a nicer home from the get-go.
10. Forgetting About Your Kids Needs
Some families include their children in home-buying decisions, taking them along on walkthroughs and letting them give input. Others wait until move-in day to show the kids their new home. Regardless of your preference, don’t forget about your kids when deciding where to move or which home to purchase. Consider the school district as well as the home’s proximity to similarly aged kids and age-appropriate activities.
Final Thoughts on Home-Buying Mistakes to Avoid
Remember, purchasing a home should be fun and exciting. Don’t let common home-buying mistakes ruin the fun and leave you feeling stressed—or worse, feeling buyer’s remorse. Having a clear understanding of your finances, what you’re looking for in your new home, and the housing market can help your home-buying journey run smoothly.
