6 Costly Mistakes to Avoid When Buying a Home
- Not checking your credit score. If you don’t know to expect with your credit history, it’s likely that buyers and lenders may not take you seriously. Looking at listings and pre-planning is fine, but you need your credit score to provide accurate information about your credit history. Review your score a few months before you’re ready to start shopping for a home. This gives you time to ensure everything is accurate and to dispute mistakes. As an added bonus, if you have a high credit score, the pre-approval process will be easier, and you’re likely to get a lower interest rate.
- Forgetting about hidden costs. Sure, you’ve budgeted for your mortgage payments and your monthly bills (e.g., utilities, insurance, etc.), but don’t forget about property taxes, homeowner’s association fees, closing and moving costs. These could set you further back if you’re not prepared. You can learn more about closing costs here.
- Creating a long-term budget. Budgeting is critical when buying a house. You should think about what you can afford on a monthly basis for the length of the mortgage with a focus on the here and now. No more than a third of your monthly income should go toward housing expenses. If the house you’re considering will cause you to go over that, work with your Realtor to find something that’s closer to your price range. Bottom line: If you can’t afford it now, it won’t matter if you will be able to afford it five to 10 years from now.
- Not working with trained professionals. Some people choose their real estate agent blindly, and that works to their disadvantage. Ask for referrals, do some research, and make an appointment to interview a couple of Realtors. Look for someone who has your best interests in mind, and is willing to work with you and your budget to find a home perfect for you. Ideally, choose someone who has been in the real estate business for a while, is familiar with the community where you wish to live, and listens to your wants and needs.
- Falling in love with a home before someone inspects it. You may have found your dream home, but sometimes even dream homes have hidden flaws. Before you get your heart set on a home, have someone thoroughly inspect it. This could possibly save you additional time and money, and you’ll know if a house is going to be more work than it’s worth. Find an inspector that is independent from the real estate broker you choose to avoid a conflict of interest.
- Failing to research. You may love a home but not the neighborhood. Research the area to make sure it will be a good fit for you. If you want to live in an area with good schools, research before you look at homes. Look into the resale value of your home. If you decide to sell it later on, will you be losing money should you try to sell it?
Talk to all your Realtor about all of these potential pitfalls, and she’ll be able to help you avoid them.