Are you excited to start on the road to home ownership? It might be your first time or maybe you’ve been through the song and dance before?
It doesn’t matter: the same pitfalls lurk whether you’re shopping for a starter home or a lavish mansion.
1. You didn’t get pre-approved.
A pre-approval is basically a promise from the lender that you’re qualified to borrow up to a certain amount of money at a specific interest rate (under certain circumstances). A pre-approval aids you in several ways in your home purchasing process:
- It lets you know what your financial limits are in your home search.
- When you are ready to make an offer, this pre-approval will support your offer because it proves you are a serious buyer and you have funds ready for the home purchase.
- It will speed up the lending process in case a quick closing is necessary.
2. Not considering additional monthly cost.
You have your pre-approval. Awesome! However, the purchase amount that your bank is willing to finance might not be the amount that you are actually comfortable with. Have you given thought to home owners insurance? How much are your local taxes?
Other cost to consider might be:
- Monthly Home Owners Association (HOA) dues.
- Home and yard maintenance.
- Additional utility cost (water, heating cost) if your new home or lot is larger than what you had in your rental.
Benefits to consider are certain tax deductions for homeowners. Ask your local tax professional.
3. You can’t see “the good bones” of a home.
The location is great, the price is right, perfect number of rooms. Everything adds up but you just seem not to be able to see past the dated decor, the brass fixtures, maybe even some deferred maintenance. Maybe you really don’t want to do any work and move right in?
There is a price for updated, perfect and “move in ready”. Are you willing to pay the price? Take a step back and think about it: It is often cheaper to do some home improvements yourself to save money. Most likely you’ll still save some cash if you hire a contractor to do the updates.
If you have the vision, you will likely save money off the purchase price AND the chance of finding yourself in a multiple offer situation (which actually drives the price UP) is less likely.
4. You didn’t believe the mantra: Location, Location, Location.
Have you done your neighborhood homework?
- Ask your real estate agent about home values in your neighborhood in the last 12 – 24 months.
- Drive the neighborhood at night. Maybe you’ll see the neighborhood in a new -excuse the pun- light.
- Chat with the neighbors. Ask them questions about previous owners and things that happen in the neighborhood. You’ll be surprised what neighbors want to you to know.
- Take a look at your closest schools.
5. Being too picky or too swift in your decision.
Tell your real estate agent what you want in a house! Dream! However, when it comes down to it you might have to compromise. The choice might be simple but raw: either compromise or keep on renting until you can afford everything that’s on your list.
On the other hand, don’t be swept away by minimal but effective upgrades that you end up paying lots of money for. If this one particular house has what NO other property offers, by all means, go for it. Just don’t be impressed by ‘bling’. Real value is what you are looking for. Ideally, search for a home that you can add value to yourself.
6. Buying the most expensive house on the block.
If you have the home of your dreams you really don’t consider moving. In short, you’re are happy and you have the most expensive house on the block. Good for you. However, if you are like most homeowners you will sell your home within 5 to 7 years after the home purchase.
Your future buyers will want to buy a $500,000 home in a $500,000 neighborhood. Quite frankly, all the lower values will actually pull yours down.
7. You didn’t have a home inspection.
As a future new homeowner, you want to make sure that you get exactly what you are paying for. Get the home inspected to learn what condition the house is really in. A home inspection is also a negotiation tool to lower the price or to get out of the contract if the condition is completely unacceptable.
8. You used the sellers agent-what can go wrong?
As a buyer, you do not have to pay for any real estate agent services. The seller pays for that. A buyer’s agent will be your advocate and guide you through the home buying process. If the involved agent is the seller’s agent his interest lies in the seller only. If he is a transaction broker, then he basically just makes sure the sale/purchase is completed without recommendations, suggestions, or advice.
9. You forgot about closing cost…
…when you started looking for homes. Ask your lender about closing cost to help you prepare for what you might have to expect.
10. Spending big while you are on the house hunt.
While you are on the house hunt keep your spending to a minimum. No you don’t have to go hungry! Simply don’t buy a truck or run up a credit card bill. Even though a lender has pre-approved you, when your income to debt ratio has changed so will your lender’s opinion on your credit worthiness.