There comes a time in a person’s life when a new door will literally open. At one point, you will be moving out of your childhood home or rented apartment, and move to your new home. Buying your new home is a giant leap, so do not tread lightly. It is important that you avoid these common mistakes buyers tend to make when purchasing a new home.
Finding a home before getting pre-approved
Looking for a new home is an exciting task. However, it is also an emotional task that may have you falling in love with different houses on the market. Before your heart starts skipping at the sight of marble floors, make sure you know your budget. Get a credit check and establish your budget with your lender. Having a pre-approval will save you time when looking at the market and give you the edge over other bidders with no pre-approval. Take note that being pre-qualified is different from being pre-approved from your lender. Pre-qualification is quicker as it gives you just a rough estimate for your mortgage. Pre-approval involves a comprehensive credit check to provide you with actual mortgage amounts and actual interest rates. Buying a new home should be perceived as a financial decision rather than an emotional choice. Getting pre-approved will save you the heartache of falling in love with a house you cannot afford.
Overlooking other expenses
After getting a preapproval, home buyers think that the house cost automatically matches your loan. Aside from mortgage, you should also put into consideration some closing costs. These include appraisal and home inspection costs, upfront house repairs, loan origination fees, and even moving costs. Buying a house is not like buying a brand new laptop or mobile phone where you pay upfront and get the complete package. The typical down payment would be 3 percent to 20 percent of the home’s price, exclusive of the closing costs. You should also consider the mortgage lender fees.
Overlooking a long-term budget
Home buyers may compute for all upfront buying costs but can fail to consider the long-term fees. Avoid the mistake of not creating a monthly household budget for housing costs, mortgage, interest, taxes, and property insurance. Some places even have homeowners’ association dues. Electric and water bills must also be included. Property taxes and insurance tend to go up every year so better ask yourself now if you can really afford your new home in the upcoming years. Make a rough estimate of what will be your income and expenses each month in the next 10 to 15 years. Make sure you clearly have the means to pay for your mortgage and more. The realistic debt-to-income ratio is having your monthly home expenses consume less than 30 percent of your monthly income.
Focusing too much on your wishlist
Everyone has their ideal home. You might want a bathtub in the master bathroom, a fancy patio outside, a walk-in closet, or even a small swimming pool. While it is exciting to have a checklist for your dream home, remember that you have a budget to stick to. This means you would need to compromise on some aspects when looking for a new home. Ask yourself if you really need that basement entertainment room or hardwood floors in every room. Rather than making a wishlist, make a three-part list with the following categories: must-haves, nice to have, and deal-breakers. This will help your realtor find a good selection of houses for you.
Skipping the home inspection
Not getting a home and pest inspection can save you a few dollars but can cost you hundreds in the future. Save yourself from unexpected repairs by getting your potential house checked by a professional home inspector. Would you buy a car without test driving it? In the same way, you cannot rely on how the house looks when you first walked in. Remember that some issues can be hiding and can turn into a money trap when not addressed before purchase. Never compromise with major flaws during your purchase.
Rushing to make a decision
Choosing a house that is hot on the market may lead you to pull the trigger quickly. However, major decisions like this involve important steps. Go around the neighborhood and check if it feels safe at night. Check for possible loud noises during a normal workday especially if you did a house visit on a Sunday. Research if the property is fairly priced. You might have a fear of losing your chosen home but there will always be places for you to check out. Take time to decide on your new home as you will be staying there for a long time.
Buying a new home can be an overwhelming task. But you have to treat it like any other major decision in life. Take a deep breathe, make a list and slowly go through each step until you find yourself sitting in your new living room with a big smile on your face.