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Posted over 10 years ago

Homebuyers - Mistakes to Avoid

If you are in the market to buy a home, now is the time. Economic facts show that home prices are rising but still affordable, and interest rates are the lowest they have been in years. Low home inventories are pushing prices up and the market is beginning to shift to a seller's market. If you have been sitting on the fence or waiting on the sidelines, now is the time to shift gears and make a move to buy.

While home buying can be exciting, it can also be scary and overwhelming. The best thing to do before you go head over heels is be prepared! Buying a house is the biggest investment most people make in a lifetime, so knowing what mistakes to avoid is important.

1. Don't buy more house than you can afford!

The first thing to determine before buying a house is your budget. You do not want to saddle yourself with a mortgage you cannot afford. To figure out a comfortable mortgage payment, consider your income, reserves for emergencies and cash for a down payment. When considering your expenses, be sure to include not only your car, student loan and credit card payments, but also your food, gas and transportation and household expenses, as well as your entertainment and charitable contributions. If you do not regularly set aside money for an emergency fund, now is the time to add in a monthly amount to cover any unforeseen future expenses. Consider the cost of property taxes and homeowner's insurance when considering your mortgage payment. If these expenses are escrowed into your mortgage payment, you will see some fluctuation in your payment each year.

When you have a good idea of what you can afford in a monthly payment, find a reputable lender who will pre-approve you for a mortgage loan. Use discretion and be cautious as lenders may tell you that you can afford a higher payment than you calculated for yourself! Once an affordable payment is determined, your lender will let you know what purchase price you can afford.

Once you are pre-approved for a mortgage, do not do anything to alter your credit, such as buy a car, apply for a credit card or make other big purchases. Anything that alters you credit score after you are pre-approved may end up disqualify you for your loan.

2. Be prepared for unexpected expenses

If you are a first time homebuyer, you may be accustomed to the property owner paying for any repairs. As a homeowner, you will be required to pay for any needed repairs. Along with paying for property taxes and homeowners insurance, there may also be monthly or annual homeowner's association dues and assessments charged to live in the neighborhood you choose. Once you move in, you may want to upgrade cabinets or appliances, put in new carpet or give the house a new paint job. Maybe the yard needs a little extra landscaping or you just need a lawnmower and snow shovel. As we mentioned earlier, make sure your monthly budget allows for these added expenses. If you do not have the reserves needed for the unexpected expenses, it can leave you in financial difficulty.

Once you are confident that you can afford a home and have the realistic expectations of things to come, you are ready to begin thinking about what you need and want in your new home.

3. Be realistic but don't compromise on what is important

Make a list of what you absolutely have to have in your new home. The 'must haves' should include the things that are most important to you and your family and meet the needs of your family. This may include things like the minimum number of bedrooms and bathrooms you need. Do you need a garage, a playroom for the kids, a big kitchen for entertaining, a large and safe yard for the kids and the dogs? In addition to these, you want to consider the neighborhood; maybe you want to be in a good school district or want to be close to work. If you plan to live in your new home for a long time, make sure you take all of your priorities into consideration when buying. If you only plan to live there for a couple of years, you may be able to make more compromises.

Housing inventory is very low right now. One thing to consider when putting your list of 'must haves' together is that it may be very difficult to find the perfect home. Therefore, understanding what you have to have and what you can compromise on is important. Cosmetic changes are easy and often quite affordable, so if you do not like the color of paint or carpet, those are easy changes to make. If your budget is tight, you may not want to compromise on large ticket items like a roof, furnace, water heater or major appliances. Know what you absolutely must have so you do not end up with buyer's regret.

4. Consider the neighborhood

Once you have an idea of which neighborhoods you want to live in or what part of town suits you and your needs, do some homework. While it may not be possible to predict the future of your chosen neighborhood, gather as much information as you can from the city or county. Are home values rising or declining? How are the schools? Are there plans for any major developments that could lead to bigger roads or highways? What are the zoning laws? If you are planning to settle down in a specific neighborhood to raise your family, it is worth your time to ask questions and get as many answers as you can.

5. Don't skip a home inspection

If you have not seen the movie 'The Money Pit', consider watching it before you buy a home. Sometimes when people find the perfect home, they are too excited and cannot see any of its flaws. Once you find a house, plan to have a professional property inspector do a full inspection on the home. This is money well spent. The inspector is unbiased and able to find flaws you may have overlooked. All aspects of the home are inspected such as the roof, windows, electric, plumbing, heating, sewer and the foundation. The final report may reveal the roof is old and damaged and needs to be replaced, or maybe the furnace is 15 years old and has not been cleaned in almost as many years. Maybe the plumbing and electric are out dated. Knowing ahead of time what the issues are will allow you to determine if you want to go forward with the purchase. Again, minor cosmetic issues are easy to fix and generally inexpensive, but you do not want to be caught off guard and unprepared for major repairs that could cost you thousands of dollars.

6. Don't take the journey alone!

While many people begin their home search looking for homes on the internet, be sure to hire a reputable real estate agent to represent you. A real estate professional understands the legal aspects of buying a home and they are experts in the industry.

Additionally, they have the tools to help you narrow your search. This saves a lot of time and legwork. If you need help finding a lender, they should be able to refer you to a reputable one. When you find a home you want to make an offer on, they will write up the contract so you are protected and your best interests are considered. Your real estate agent is there to assist you through your entire home buying experience.

There is no reason to take this journey alone. It is customary for the seller to pay the commissions due to your agent, so while there is no cost to you, it could save you thousands in potential mistakes.

Homeownership is a big deal. Whether you are a first time homebuyer or a seasoned buyer, it makes good sense to be prepared and to have a good real estate agent and lender on your side.


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