It's no secret that purchasing a new home can be costly. There are many different ways buyers can go wrong when purchasing a home, which can make the home-buying process even more expensive than it already is. In addition to costing you extra money, these often-made mistakes can lead to extra "minor" headaches that are not otherwise necessary.
The following are 10 of the most common mistakes that you should be aware of making when you are buying a new home:
1. Choosing a Home That Doesn't Fit Your Financial Situation: Many people go out with the idea that they will find a home they like and buy it rather than carefully planning what it will cost to maintain the home properly. Not only do you have to consider the mortgage payment but the utilities as well. This includes the monthly costs of heating/air conditioning, water, electric, etc. and the costs to maintain the home from cutting the grass to fixing things when they break. Truly being able to afford your new home is key to purchasing a property that allows you to live within your means.
2. Choosing the Wrong Mortgage Financing Package: Understanding the mortgage package you are using to finance your home is vital. Using an independent lender is usually a great option. They will consider multiple institutions and banks to take a loan from rather than just looking at one single financial institution. This ensures you are getting the best price and the best interest rates possible to keep your payment costs lower and to let more money from your payment each go toward the principal rather than the interest.
3. Focus on Your Family's Needs: Don't be influenced by marketing trends more than you are by what your own family needs. If a home doesn't meet your family's needs, buying it is kind of a senseless purchase. Focus on yourself and your household and what you need to live comfortably. Find a home that supports those needs.
4. Buying With Emotions: Don't let your emotions get the best of you when you are searching for a home. If the deal falls through you will end up with a big disappointment if you "fell in love" with it and can't have it. Moreover, if you buy a home based on emotions now and those emotions change later, you are stuck with a home you don't even want or like.
5. Running up Credit Cards While Searching for a Home: Tempting as it may be to go out and buy things for your "soon to be new home" avoid the temptation as the more you run up your credit cards the more your credit score declines. If you need to be approved to purchase a home, you want your credit score to be as high as possible when you are getting approved to do so.
6. Allowing Income To Decrease While Searching for a Home: If you are a freelance worker, you will want to keep your income up while you are searching for a home to ensure you can prove to the bank that you can afford your new purchase. Avoid taking extended amounts of vacation or something like maternity leave that can affect your income. After all, you do have a big monthly expense coming up with a new mortgage to pay.
7. Know the Location Of Your New Home: Be sure you understand the area where you are purchasing your new home. This is important as you need to know what area you are buying into. Check out the basics: What is the crime rate like? What are the median home price and value? What are the schools like (especially if you have kids that you will be sending to those schools)? How far is the home from your job? How long will you be spending commuting each day? Are the amenities you need within a reasonable distance from the area? Knowing what you are getting into ensures that you are not set up for disappointment later on.
8. Understand the History of Home Appreciation: A home is an asset that you want to see appreciate (gain value) in the future. Understand the rate at which homes in the area have been increasing in value, so you have an idea of what to expect when you purchase your own home. However, don't rely on these rates to stay true. A housing crash or stock market plummet can affect the entire real estate system and value of your home. Make savings plans that envision your future without counting on a certain percentage of appreciation of your home as part of your plan for financial well-being.
9. Skimping on Home Inspections: The average quality home inspection will cost $300 to $400. Don't skimp on this to find a company that might let you save a couple hundred dollars. Understanding what you are buying is vital before closing, once you close you are likely stuck with what you have bought. Getting a quality inspection now could save you the nightmare of problems down the road.
10. Going At It Solo: For the large majority of people, a home is the largest purchase they will likely ever make. Going at it without professional advice can be foolhardy and has come back to haunt many people in the past. Getting an experienced real estate agent on your side ensures that you are thinking of the big picture and can help you avoid falling into many other traps that make the home-buying experience a nightmare.
This list is by no means an exhaustive one, but it gives you a few ideas of some things to think through before making what will likely be the biggest purchase of your life. So sit down, talk it out, and make sure you get a home that works for you and meets your family's needs within your budget first and foremost.