There are a number of common home buying mistakes that almost anyone could make when thinking about buying a new home, particularly as a first time buyer. The trick isn’t necessarily to know what these issues are (they could be different depending on the area, seller, or other factors) but rather, preparing yourself beforehand so that you are ready to deal with almost anything that might happen.
We know that you’re probably tempted to dive right into looking at listings in the area you want to move to, expecting that it will be as simple as contacting the listing agent or owner and arranging a deal. Unfortunately, it is rarely this simple. If this is your first time purchasing a home, we recommend you look through our First Time Home Buyer Guide.
However, whether you’re a first time home buyer or investor (investors make mistakes too!) there are a number of little things that can keep you from buying the home of your dreams or leave you saddled with higher expenses than you were prepared for. This may be anything from not being able to get the mortgage option you need to overspending on a home that needs undisclosed repairs to getting stuck with an agent that is working for the seller instead of you. Below are some of the things you can do to avoid running into the most common home buying obstacles.
Tips to Avoid Common Home Buying Mistakes
1. Get pre-approved for a loan.
While this isn’t a necessary step, it always helps to research your mortgage and home loan options before you start looking for a home. This will inform you as to how much you can reasonably afford to spend on a home, and keep you from bidding on houses in an area that isn’t right for you. It will also put your bid on the fast track when dealing with a seller, and give you some leverage during negotiations. Many sellers give pre-approved homebuyers preference over non-approved bidders, and some sellers will refuse to deal with you at all unless you already have guaranteed financing.
2. Find a Real Estate Agent that works for your interests.
All too often new homebuyers get roped into dealing with an agent that is working for the seller, solely because the agent was mentioned in a particular property’s listing. The first thing you should know about agents is that they are often working for the seller first, and the homebuyer second. When you find a real estate agent on your own beforehand, you can stipulate that they be a ‘buyer’s agent’. This means they will be working for your interests, and you could save up to 10% more on your home purchase than you would have working with a seller’s agent.
3. Save up money for a down payment and closing costs.
Even if you qualify for loans with a ‘no down payment’ or ‘low closing costs’ option, the expense of ordering the proper inspections, title reports, and other charges can quickly add up. Your best bet is to take time saving up for a home so that you are well prepared for whatever additional costs come your way. Remember too that a higher down payment may keep you from having to pay mortgage insurance and could help you lower your interest rate. It’s also possible that the home will be in need of repairs (particularly if it is an older home) and you may need the extra cash to help you remodel.
4. Order a Home Inspection
There may be issues with the home that even the seller is unaware of and does not disclose to you. This may be something like issues with the foundation, problems with the insulation, electrical issues, and more. Termites may be undiscovered if they have not yet made a visible impact on the exterior of the home, and even newly built houses may have issues in their construction. A home inspection could spare you from overspending on a home or from bidding on a veritable ‘lemon’ in general. Of course, it’s always important that you understand the home inspection after it has been completed so that you know which issues need to be addressed and which are commonplace items that are relatively insignificant. Find a home inspector who will walk you through the report afterwards.
5. Do your homework
This applies not only to figuring out your finances beforehand, finding the best loan options, and researching the area, but also to looking into the items a seller is not required to disclose. Depending on your state, your seller may not be required to inform you as to what happened on that property in the past. This can be something as severe as drug trafficking, wherein toxic chemicals may now be permeating the very walls, to deaths that happened in the home more than 3 years previous. No one wants to move into a home that is riddled with toxins, and while some buyers may not mind a home with history, it’s probably still a good idea to find out what that home’s history really is.
6. Fix your credit
This may not apply to everyone, but the better your credit is, the easier it will be for you to get a loan and buy a home. Some credit issues may not be readily resolvable, such as a bankruptcy or foreclosure within the past 10 years. But there are still things you can do to make yourself look better in the eyes of lenders. Take care of any past judgments or claims against you. Keep track of the debts you have been making good payments on (even those which are not mentioned on your credit report- such as utilities or insurance payments). Make sure you are paying on all of your debts on time. Finally, order your credit report and check it for any mistakes or issues you can take care of before applying for a loan.
We can’t promise that you’ll be able to avoid all common home buying mistakes if you follow these tips. Some sellers are simply notorious to work with, and your financial circumstances or credit history may provide more hindrances than those mentioned here. However, if you follow the above advice, you can at least avoid some of the most frequent issues homebuyers deal with sometimes. When it comes to making one of the largest financial decisions of your life, you can never have too much information on your side.