Most Common Home Buying Mistakes and How to Avoid Them
Oct 26, 2022
Buying a home is an exciting experience, especially for first-time buyer. While you might want to jump right into touring homes, don't let the excitement allow you to make careless mistakes along the way. A home is a huge purchase and one that shouldn't be taken lightly.
To ensure that you make a smart home purchase, here are a few of the most common home buying mistakes and way that they can be easily avoided.
1.Not Figuring How Much Home You Can Afford before Shopping
As a home buyer, it’s easy to want to jump right into the home search. However, this can often lead to disappointment and frustration. No buyer wants to fall in love with a home only to find out it is well above what they can afford. That’s why it is extremely important to figure out what you can afford and plan a budget accordingly.
As a buyer, you will most likely want to aim on the lower side to ensure you can get a mortgage loan with payments you're comfortable making. To reach this number, use a mortgage affordability calculator. This mortgage calculator will provide a price range that is affordable to you. Go ahead and talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before starting the home search process.
2. Not Shopping Around For Mortgage Loans
One of the biggest mistakes buyers can make is not shopping around for mortgage loans. Shopping mortgage loans is the same as shopping for any other expensive purchase- you will want to compare all your options. Mortgage interest rates vary from lender to lender. Why settle for one quote when there could be a better one?
Instead of settling for a loan that may not be in your best interest, get pre-approved for mortgage loans with other mortgage lenders. This will provide you with multiple quotes to compare. Understand the terms and details of each while comparing them. Choose the best mortgage lender and offer available to you.
3. Not Double Checking Your Credit Report
Your credit report is an important factor that lenders use to determine eligibility for a mortgage loan. If you don’t want to get rejected or get quoted an interest rate that is higher than you deserve, you will want to double check your credit report.
To provide added peace of mind, you may request a free credit report from one of the three credit bureaus. Look over your credit report information to make sure there are no errors that could negatively impact your mortgage loan. If you find errors in the report, dispute them immediately before applying for a mortgage loan.
4. Not Exploring Loan Programs and Down Payment Assistance
Buying a home is a huge investment. Most buyers, especially first-time buyers, don’t have that kind of money upfront to pay for it. Luckily, loans are available to help make buying a home easier. What many buyers don’t realize is how many loan and down payment assistance programs are available, as well as how many they qualify for.
Many government programs like VA loans, USDA loans, or FHA loans help buyers purchase a home with little or no money down. Be sure to also look into first-time homebuyer grants. Many of these are offered through your state housing finance authority, as well as your city and county governments. An experienced lender will help you explore these options and determine which ones would work for you.
5. Making Too Small of a Down Payment
While having a low down payment can be certainly beneficial, many homebuyers have regrets and wish they had saved up more for a bigger down payment. Think about it in the long run. Putting down a larger down payment means providing you with a smaller mortgage that is much more affordable long term.
While it might seem tempting to put down assmall of a down payment as possible, consider the decision in the long term. If you have the extra money, or time to save up the money for a larger down payment, that may be the better option. However, the one downside with taking the time to save up money is that home prices and mortgage rates may increase during that time. Nonetheless, weigh the pros and cons of both options. A larger down payment may actually be in your favor.
6. Spending All of Your Savings
Just because you have plenty of savings to you towards down payment and closing costs doesn’t mean you should spend every penny. If you are purchasing a pre-owned home, there is a good chance you will encounter an unexpected repair after moving in. There is almost always some issue that turns up whether it's replacing a hot water heater or repairing weather damage.
Save enough money to make a down payment, pay for closing costs and moving expenses, and to take care of repairs that may come up. Your lenders can provide estimates of closing costs, and you can call around to get estimates of moving expenses. From there, budget in some cushion room to hold onto for repairs.
7. Underestimating Home Ownership Costs
Home ownership is more than just paying a down payment, closing costs, and monthly mortgage payments. There are additional bills that mortgage companies don’t factor in when qualifying you for a mortgage loan. It’s up to you to figure out whether you can afford it or not. These includes utilities like gas bills, cable bills, electric bills, HOA fees, and more.
A knowledgeable local real estate agent will be able to go over neighborhood property taxes and the typical cost of insurance. Also, ask to see the seller's past utility bills. This will give you a rough idea of what you can expect to pay when you move in.
8. Not Taking Advantage of Low Commission Savings
Not taking advantage of low commission savings is one common home buying mistake many don't think about. Buying a home is one of the biggest purchases a person can make. If there is an opportunity to save money when buying a home, why not take it? One way many buyers miss out on savings is by not looking into non-traditional brokers that are focused on helping buyers buy smart and save smart.
Low-commission brokerages like SimpleShowing do just that. When purchasing a home, buyers receive half of their agent's commission back at closing in the form of a buyer refund. This is all without compromising the service and expertise you’d get working with a real estate agent.
Common home buying mistakes can be easily avoided with a good realtor by your side. If you are looking for quality service (and the opportunity to save on your new home) contact us today to see how we can help!