Buying a house, whether it’s your first or fifth, can be a daunting task that includes many potential pitfall areas. From my own experience as a homeowner and previous mortgage banker, I’ve observed common errors that many buyers make. By doing thorough research beforehand and creating a customized checklist, these 12 specific mistakes can be avoided. Here’s a guide on what you should avoid and what to do instead:
1. BUYING WITHOUT A REALTOR:
Purchasing a house is a significant event that requires expert support. Tasking a realtor with the job not only doesn’t cost you anything (as their fee is paid by the seller) but can guide you through tricky situations from house hunting to closing day. Recommendations from friends or family who have been through the process themselves is the best way to find a trustworthy realtor.
2. FAILING TO COMPARE MORTGAGE BROKERS AND RATES
During my time in mortgage banking, I saw many potential homeowners not shop around for the best mortgage interest rates, which could end up costing them enormously. It’s worth investing the time to get the best rates, just like you would when buying a car.
3. NEGLECTING HOMEOWNER’S INSURANCE COMPARISON
You should also compare homeowner’s insurance rates each year since they often increase, even if you haven’t filed a claim.
4. SKIPPING THE HOME INSPECTION
A home inspection, while not necessary for a mortgage, can help identify any present or potential problems. This significantly reduces the risk of unexpected, expensive repairs down the line.
5. OVERSPENDING ON YOUR BUDGET
A frequent trap many fall into is falling in love with a house out of their price range. Don’t let looks deceive you; overstretching your budget for what initially seems like a dream house can only lead to financial burdens in the future.
6. NEGLECTING THE IMPORTANCE OF AN EMERGENCY FUND
Unforeseen repairs are inevitable in homeownership, so it’s essential to have adequate funds set aside for just such emergencies, therefore avoiding any need for credit.
7. DISCOUNTING RESALE VALUE
Even if you plan on living in the house forever, circumstances might change requiring a move. It’s important to consider the potential resale value of the house.
8. TAKING FROM YOUR RETIREMENT FUND
It’s not advisable to borrow from your retirement funds to finance a house down payment. If a down payment isn’t within your means currently, consider other loan types or simply delay the home purchase.
9. BUYING TOO SOON
If you enjoy the convenience of a landlord handling all home-related issues, then homeownership might not be the best move for you right now. Always consider the financial and logistical responsibilities that come with owning a house.
10. LACK OF A BUDGET
Maintaining a budget can help you prepare for surprise repairs and mortgage payments, guiding you on whether you are financially ready to buy a home. It’s also advisable to clear any outstanding debt before buying a home.
11. FORGETTING TO GET PRE-APPROVED
Avoid the disappointment of losing out on a dream house because of a rejected mortgage application. Start your house hunt with a pre-approval letter from a reliable mortgage broker to strengthen your chances, especially if there are multiple offers.
