Buying a house is a huge financial step, and is one you need to take with careful consideration. It’s the quintessential American dream, but can quickly turn into a nightmare if you don’t do your due diligence. Typically, it’s new home buyers that tend to experience the worst nightmares because they simply overlook the fine print.
Understanding the mistakes that can be made during the buying process can help you build financial security without getting sunk into a money pit.
Here are 5 common mistakes new home buyers make that you should be aware of and avoid.
1. Skipping the Mortgage Pre-Approval
One of the first mistakes newbie home buyers do is fail to get pre-approved for a mortgage. First of all, getting pre-approved will give you a ballpark figure of what you can comfortably afford. There’s no sense in pounding the pavement in search of your dream home if you can’t afford the one you decide to buy. You’d be unpleasantly surprised to put an offer in on a house, only to be turned down by the bank because your finances won’t cover the costs of the home.
Not only that, but consider the seller’s point of view in the whole scenario. Let’s say the seller’s got a few bids on the property, and is in a position to sift through and compare them all. How will your offer stack up? If you tell the seller that you’ve been pre-approved for a mortgage, you might be a safer bet. If you don’t, you might be a risky bidder. Some sellers might even refuse to consider your offer at all unless you’ve got a pre-approval document from your lender. Even if the seller picks your offer, you might not be able to get as much financing as you would have hoped when you actually go through the loan application process.
At the end of the day, a pre-approval will paint you in a better picture to a seller. During this process, your lender will verify your finances and credit to see how much the bank is willing to loan you.
2. Foregoing the Home Inspection
When you’re putting up a lot of money to buy a house, you can’t just rely 100% on what the sellers and their realtor tell you about the home. Sure, they’re liable for providing you with a disclosure of everything they know that might be wrong, but even the sellers themselves might be in the dark about problems that are lurking behind the walls.
For this reason, you absolutely need to get the home inspected before you close the deal. If you skip this important step, you leave yourself vulnerable to being stuck with a home with foundation problems, mold, plumbing issues, asbestos, and hoards of other potential issues. As much as you might be attracted to the home, it could turn into a liability when everything is said and done.
Make sure that your offer is conditional upon a home inspection being conducted and passed. Make sure that you agree on what will be checked, which can (and should) include the foundation and structure, plumbing, electrical, heating and air conditioning, and mold or pest infestation.
You’d be wise to make sure the inspector is licensed and reputable. While the inspector might not necessarily be able to detect every major problem with the home, it’s definitely your first line of defense against getting stuck with a home that will cost you tons of money in repairs.
3. Getting Emotionally Attached to a House
Being in love can be an amazing thing, but it can also be a bad one, especially when your emotions are vested in the wrong thing. If you happen to stumble upon your dream house, you need to use extra caution.
First of all, if you happen to set your eyes on a home that other buyers have on their radar, you may be competing with them. If you find yourself in the middle of a bidding war, you could wind up losing out on the home altogether, or you could be snuffed out by someone else who has more money and all the right criteria that the seller expecting. You’ll be left heartbroken when you don’t walk away with the keys.
On the other hand, you just might be the one to sign on that dotted line of a purchase agreement. There are many times when the house you think is the one for you is actually one you should have walked away from. No matter how many times friends or family warned you about the place, you still might end up going ahead and sinking your teeth into it.
Think about how you’ll feel about the house after the ‘honeymoon’ period has come and gone. You might decide to overlook a property’s quirks now, but there’s a good chance you could suffer buyer’s remorse after the deal is sealed and you’re stuck with a super-small kitchen or no backyard.
When you’re in the market to buy a house, make sure you do your best to keep a cool head during the entire process so you do the thinking and decision-making with your logic instead of your emotions.
4. Not Thinking About Resale Value
You’re in the market to buy a house, not sell, so why would you even think about selling in the future? Simple. You just never know what the future holds, and don’t want to feel like you’re stuck in your home just because you won’t recoup much money after you sell.
You might get a job transfer, marry someone from the opposite end of the country, or simply can’t afford to keep up with your current mortgage payments. Whatever the case may be, you want to be able to ensure that your house can sell for a decent amount that you can then put towards another home.
This isn’t just a place where you live – it’s an investment. You’d be mistaken not to consider the resale value of the property. Consider the preferences of other home buyers. Maybe this means buying a home that has 3 bedrooms, a decent backyard, or a 2-car garage. It also helps to know if there are loud train tracks close by, or if developers plan on improving the neighborhood in the near future, which could boost the property’s value soon after purchasing.
5. Not Using a Real Estate Agent
If you’re serious about buying a home, do yourself a favor and hire an experienced real estate agent. These experts can give you invaluable advice about buying property, and can keep you from making a huge mistake. They can help steer you in the right direction about where to find the right property, and will use their sharp negotiating skills to help get you the best price possible and ensure you never overpay.
Realtors will help you navigate the complicated waters of purchase agreements, and will make sure you’re fully protected before you sign on the dotted line. All the services they provide come without the price – it’s generally the seller that flips the bill for both the seller and buyer agent.
A lot of first-time home buyers think they’re making all the right moves, but they still aren’t familiar with what can be a complex home buying process. Rather than taking a chance, use your better judgement and get acquainted with a real estate agent who can help you migrate through the buying process and avoid some seriously costly mistakes.