Buying a home is a dream come true for most people, but there are a number of pitfalls that unwitting homebuyers can easily fall into if they aren’t careful. This article will go over the most common mistakes that people make when buying a home, and more importantly, how you can avoid them.
1. Searching for a home before applying for a mortgage
Searching for a nice place to live is the fun part of buying a home. You get to look at different places, compare the pros and cons of each and spend hours imagining what life will be like living there. But don’t be too hasty. It’s important to apply for a mortgage before you begin looking at homes for sale; otherwise, you run the risk of ending up in an embarrassing situation.
All too often, would-be homebuyers find their dream home, only to realize after the fact that they don’t qualify for a mortgage that will cover the cost of buying it. For this reason, it’s important to apply for a mortgage in advance so you know exactly what you can afford and what you can’t. Don’t worry if you can’t afford your dream home right now; you’ll be able to upgrade down the road.
2. Speaking with only one lender
Another very costly mistake that homebuyers make is failing to shop around. People get so excited when they find out that they qualify for a mortgage and can buy a home that they forget to consider all of their options. Oftentimes, people sign on the dotted line with a lender that’s offering them a bad rate without even realizing that there were plenty of better options out there that they could have qualified for.
Unfortunately, once you’ve signed the contract, it can be very costly, if not impossible, to get out of your mortgage agreement until the term has expired. So, always do your homework and shop around. When you get the news that you’ve been approved, don’t feel compelled to accept the terms on the spot. Instead, take your time and get a second and third opinion from different lenders; this can save you thousands in the short term and even more in the long run.
3. Buying a bigger house than they need
Some people assume that they should buy the biggest house that they qualify for, but this can be a huge mistake. Sure, having a big house is nice, especially if you have a big family and a big income. But remember, big houses require a lot of maintenance. You might have no problem cleaning your bachelor pad, but a four-bedroom, three-bathroom house takes a little more time to clean.
Think about how many rooms you really need. Is it just you and your spouse? Do you have kids who will be living with you? Aunts, uncles, nephews? Third and fourth cousins? You might be in a situation where you really do need a massive house, but chances are you don’t need the biggest home you can afford. So, always consider the amount of work that will be required to clean and maintain the home before you make an offer.
4. Assuming you need a 20 percent down payment
Many people assume that they need to put 20% down in order to buy a home, but that’s simply not the case. In many cases, especially as a first-time homebuyer, you can qualify for a mortgage and purchase a property with as little as 5% for a down-payment. This is important because what happens all too often is that people put 20% down only to realize later on that they don’t have sufficient funds for other things they need, which leads to the next mistake.
5. Forgetting about the hidden costs of homeownership
There are many other costs involved with owning a home besides the down-payment. Forgetting about the hidden costs of homeownership can land you back in rental territory very quickly, so always remember to set money aside for closing costs, moving expenses, furniture if you need any, property taxes, utility bills, and of course, the day to day living expenses you’ll need during your first few months in your new home.
Buying a home is vastly superior to renting in every way but be careful to avoid the most common mistakes that homeowners often make. Remember, always apply for a mortgage before putting an offer in on a home, consider all of your financing options before choosing a lender, really think about how big you need your home to be, don’t automatically assume you need to put 20% down to buy a home, and most importantly, don’t forget about the many ‘hidden’ fees associated with homeownership.