It is a big investment to buy a home. It is exciting and very emotional. Where you live and finding a home that you will be happy in are extremely important, but it is important to keep a balanced and objective frame of mind to avoid a home buying disaster. Here are some of the mistakes that you should avoid.
There are a ton of mortgage types that you have to get informed about in order to find the right one for you. It is very time-consuming and quite complex, so you need to leave enough time to really study the ins and outs of lending offers so you can make the right choice. You also want to shop around, so you can save as much money as possible. Don’t forget it is quite a lengthy process to just get all the financial documents you need to submit, so be prepared that it takes time and patience. In this present market, your ducks have to be in a row, so you can quickly and confidently make an offer. And of course, remember, it will be worth it in the end.
Tip: Ask your agent for some lender recommendations.
Let’s face it, this is one of the biggest mistakes home buyers make and one they will pay for, not only literally with a serious financial obligation but also with stress and worry about how they will pay their mortgage each month. While banks will tell you can afford that home that is over your initial budget, they aren’t factoring in lifestyle! If you love to eat out, go on trips, buy new clothes, you have to consider what aspects of that lifestyle you will have to give up to afford that house that is over your initial budget. It is important to balance how much joy you will get out of a home versus what lifestyle changes you will have to make to be able to afford it.
Tip: Write down all of your expenses, especially what you spend your discretionary money on and determine what sacrifices you will have to make month after month to make the mortgage payment. Then ask yourself–is the home worth it?
In today’s crazy market, many potential buyers are foregoing home inspections in order to get the home of their dreams. But, it may look like the home of your dreams on the outside, and be a money pit beneath the hardwood floors and coved ceilings. Sacrificing an inspection to get a home is kind of like taking your savings to Vegas and betting it all on red or black; 50% of people will be ecstatic, the other 50% are forever spending money hand over fist to fix all the unexpected problems in their supposed “dream home.”
Tip: Talk to your agent, and weigh your options carefully before you waive inspection.
Consider the costs
Before you buy a home, remember that you have to tack on closing costs as well. In the past, the seller has assumed some of the closing costs for buyers to get it sold. In today’s market, buyers are not only responsible for their own closing costs but to get their offer accepted, they are often paying the seller’s closing costs too. In other words, tack on an extra:
|Escrow||1/2 of 1% of home sale price|
|Final Payment of Utilities||varies|
Tip: Get a close estimate of how much this is going to cost before you sign the contract.
Costs for home ownership don’t end
Now that you have forked over all the money for your home, the financial bleeding stops! No, that is not true. Home ownership continues to cost you money if you are going to keep your place looking nice and ensure that it holds and grows in value. You need to factor in a certain percentage of every paycheck that you will put aside for the new roof 10 years from now, when the A/C breaks down, adding plants and trees to your backyard, or finally replacing the avocado green appliances. You will continually need to save money for the purpose of keeping your home looking nice and in resale condition.