Buying A Home? Don't Make These Costly Mistakes
Buying a home or know someone who is? Here are three common, and potentially costly, mistakes to avoid.
1. Overestimating what you can afford
Real estate brokers say first-time buyers often focus on the down payment and monthly mortgage amount when calculating how much they can afford and forget to factor in closing and other costs when buying a home. When buying a home it's important to remember too that monthly payments include not just the mortgage, but interest, taxes, and insurance-something that buyers can often forget when figuring out their budgets.
It's a good idea to get pre-approved for a mortgage loan so you know how much a bank is willing to lend you before you make an offer on a home. But keep in mind that the amount you're pre-approved to borrow from a mortgage lender may be more than you can actually afford once you factor in taxes, insurance and other costs like condo or homeowners' association fees and maintenance.
As a general guideline, your total monthly payment (including mortgage principal, interest, real estate taxes and homeowners insurance) shouldn't exceed 28 percent of your gross, or pre-tax, income.
While some sellers are still asking for 20 percent down payments, it's possible to pay much less. Just remember that the lower your down payment, the bigger your mortgage loan (and the more you'll pay in interest).
2. Letting your emotions get the best of you
Don't get so attached that you buy with your heart and not your head. "It's difficult not to get emotionally attached when buying a home. Homeownership is a future investment. But be careful. Get too emotionally attached and it can set you up to spend more than you can afford.
Prioritizing what you want in your home is very important. Make a list of the most important qualities, whether you want a certain school district, updated bathrooms, a backyard, etc. Then figure out what you aren't willing to give up. You won't find the perfect home that meets your entire list so narrowing it down to what matters most can help you through your search process.
A real estate agent can help facilitate the searching and buying process. Using apps and sites like Zillow, Trulia, Street Easy and Redfin can also help speed up your search.
3. Not planning ahead
Once you've narrowed the search and you are ready to make an offer, check with your agent about the demand. Is the home getting multiple offers? Has it sat on the market a long time? Will it require a lot of upgrades? Make sure you get a thorough inspection. Buyers often don't get an inspector with the expertise to check the pipes, the plumbing, or air conditioning. Remember the resale opportunities. Consider the school district, because even if you don't have children or plan on having any, the next buyer might.