6 Common Home Buyer Mistakes to Avoid
You've determined that you're ready to buy a home. You've saved enough for a down payment, you've been searching for properties, and you're ready to make your dream a reality. Buying a home is an exciting process; however, if you're not careful, it can turn into a nightmare. Here are 6 common home buyer mistakes to avoid.
1. Not Budgeting Properly
It's easy to overestimate what you can afford. Although owning a home may be a better investment than renting, it's not necessarily going to be cheaper. Take a good look at your income and expenses for a few months before determining what you can comfortably afford. Make a budget sheet using Microsoft Excel or any other budgeting software. List all your income as well as every single expense, including food, gifts, and even haircuts. Keep in mind any emergency expenses as well.
When budgeting, don't forget about hidden costs including closing costs, homeowner's insurance, property taxes, HOA fees, and décor and furniture to fill your new home.
2. Neglecting your Credit Report Prior to Getting Approved
Your credit score can be either helpful or detrimental to your loan process. Getting a full credit report from all three credit reporting agencies - Experian, Equifax, and TransUnion - before applying for your home loan will not only let you know how credit-worthy you are, it can lead you to possible reporting errors. One study found that as many as 25 percent of credit reports have damaging errors.
3. Not Getting Pre-approved for a Home Loan before Searching
Most sellers prefer bids from prospective buyers who are already pre-approved for a home loan. Being pre-qualified and pre-approved are different. Pre-qualification is usually the unofficial process of informing a lender of your credit status, income, and debt. The lender can usually give you a ballpark figure of what type of loan they may offer. Pre-qualification is based on your word alone and doesn't hold much weight with sellers.
Pre-approval is the verification of the information you provided to the lender. This process will give you a better idea of how much the bank will loan you. Getting pre-approved can get you a step ahead other potential bidders that have no pre-approval.
4. Skipping the Home Inspection
You love that old fixer-upper, but skipping the home inspection can cost you as much in repairs as the cost of the home itself. The home inspection should include the overall foundation and structural features of the house, the roof, walls, plumbing, the presence of mold, pest infestations, heating, air conditioning, appliances, and the electrical system. Also, ensure that your inspector is certified with the American Society of Home Inspectors.
5. Picking the wrong neighborhood
You've found a home you love, but do you know what happens in the neighborhood after dark? Do you know the crime rate? What is the traffic like during rush hour? How is the school district?
Knock on your potential neighbors' doors, and don't be afraid to ask questions. Call the school principal, or talk to parents who are waiting to pick up their kids after school. Read the local newspaper to learn more about the community. There are many real estate blogs and community websites on the internet so before buying the home, check out the neighborhood.
6. Using a Bad Real Estate Agent or No Agent
You want a real estate agent who understands your needs and limitations and will work for you and look out for your interests. Get references from friends, family, co-workers, and neighbors. Consider interviewing a few different agents to find out about their activity and experience in your area.
It's definitely possible to buy a home without the help of a professional real estate agent, but realtors have access to all the homes on the market through the multiple listing service (MLS). Unless you are in the real estate business yourself, you'll likely not have any access to the MLS in your area. Real estate agents spend their time sifting through listings, making appointments to show homes, meeting with inspectors, and helping you create a comparative market analysis to determine proper pricing.
The real estate agent you choose could be the greatest asset or biggest obstacle to finding your dream home.
Blog Archive2010-08-12 15:13:54
6 Common Home Buyer Mistakes to Avoid
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