5 Home Buying Mistakes You Should Know About
Participating the world of real estate naturally comes with a lot of highs and lows. You are going to make mistakes. This is especially true if you’re buying your first home. Buying a house is a lot different now than when your parents bought theirs, and the market itself is constantly changing. Here are five common home buying mistakes you should try to avoid.
Miscalculating How Much You Need to Save
Most people know you have to save up a lot of money to buy a house, but the just how much do you actually need to save? Buying a home in cash is the ideal situation, but most people do not have the time nor the money to pay full asking price right away. This means you will likely have to take out a loan. First and foremost, you want to pay off all of the other debts you have. You also want to leave money for emergencies. You do not want to put all of your money into your home because you may end up needing it. What happens if you buy a new home and then lose your job a month later? When it comes to the mortgage, you do not want the payment to be more than a quarter of what your monthly income is. When it comes to the down payment, you want the down payment to be 10% if it is a 15-year fixed plan. If you can save up enough to make a down payment of 20%, you will be in an even better position. This seems like a lot of money, but without a decent down payment you are going to have extremely high mortgage payments.
Buying More Than You Need
We dream of having an enormous dream home, but focusing too much on size can backfire. You might be able to find a 3,000-square-foot house in your budget, but you might have to compromise on things like the school district and the proximity to restaurants and other amenities. These compromises might not be worth it if your family can live comfortably in 1,800-square-foot home. Think about what the minimum amount of space is that you need and consider what else in on your wish list. Having a big, beautiful house might not be worth living in a neighborhood that has high crime rates.
Only Getting One Rate Quote
Shopping for a mortgage seems like it is different than shopping for a car or a wedding dress, but it really isn’t. You have to shop around if you want the best deal. One lender might charge a very different interest than another one would, so you are better off getting multiple quotes. Ideally, you want to apply with five mortgage lenders and compare the quote. You will likely save thousands of dollars over the course of the loan if you shop around.
When you start thinking about buying a house, one of the first things you do is check your credit report. Unfortunately, credit reports aren’t always accurate. Just like with everything else, mistakes happen. Triple check the report to make sure there are not any errors in it. You do not want to end up paying a higher interest rate than you have to. It helps if you have more than one credit report performed. There are three different credit bureaus, so use all three. If you notice any errors, you can dispute those errors.
Another thing to consider is that a few weeks likely pass between the time you apply for a mortgage and the time you finalize a loan. During this intermediate period, you want to leave your credit alone. You don’t want to go on a shopping spree and by all new furniture for a house you haven’t even closed on. The problem is that decisions regarding your mortgage depend on your credit score, as well as much debt you have and what your income is. You don’t want to rack up last minute debt. Plus, every time you apply for a credit card, your credit score goes down. You have an idea as to what your interest rate is going to be when you apply for a mortgage. You don’t want that to change by the time the loan is finalized. Usually a week before you close on a house, the lender will check your credit one last time. In the worst case scenario, if the credit score changes too much, the whole mortgage could be cancelled. The best thing to do is pick out furniture and appliance ahead of time but wait until the mortgage is finalized before charging them.
Becoming too Emotional
Buying a home can be an emotional event. Maybe you’ve saved up for years and you’re finally buying the house of your dreams. Maybe you see a house and immediately fall in love with it. You want to try your best to stay objective. Emotions often cloud judgment. You might end up paying more than you wanted to, or you can end up having your dreams crushed if the sellers go with someone else. Another emotion you have to avoid is arrogance. Negotiations are part of the game, but you don’t want to become obnoxious during the negotiation process. Even if you make the best offer, they could end up selling to someone else simply because they like the family better. For example, if you start asking for items in the house the seller doesn’t intend to sell, you can end up unintentionally annoying the seller. You want to be as cooperative and as amicable as you can be.