How To Buy A House: Home Buying Mistakes To Avoid

Owning a home is one of the most effective wealth-building tools available to the everyday consumer.

It’s no wonder that first-time home buyers are out in force. One-in-three home sales today are to first timers, and many more are queuing up to be homeowners in 2017.

But when you’ve never done something before, it’s difficult to know what you shouldn’t do. Sometimes, new buyers make mistakes.

Fortunately, the mistakes, even if made, don’t mean disaster. But if you can avoid them, you should.

Following are common mistakes for first-time buyers — and experienced ones — to skip when you buy a home.

1. Jumping The Gun

Don’t go shopping for property before getting pre-approved for your mortgage. Mortgage pre-approval offers so many advantages. It’s fast, and can save you headache down the road.

  • Sellers and agents won’t take your offer seriously without a pre-approval letter
  • Pre-approval helps you determine what you can afford
  • Pre-approved mortgages close faster
  • Pre-approval minimizes financing problems during escrow

Note that mortgage pre-qualification does not usually go far enough. Until you complete an application package and get pre-approval from a mortgage underwriter, you’re not fully-prepared to close on a home purchase. This could result in embarrassment, wasted time, and lost money.

2. Going Too Big

Mortgage lenders work with certain formulas and ratios to determine how much you can afford to borrow. However, just because you can borrow a maximum amount doesn’t mean you should. Lenders don’t know everything about you, and what they don’t know can hurt you. For instance:

  • Expensive hobbies may leave you less money for bills
  • A planned job or industry change could cause your income to decrease
  • Starting a family, retiring or sending kids off to college may strain your budget
  • Too much mortgage could reduce what you can save or contribute to charity
  • An expensive commute can unbalance your checkbook
  • Starting a new business could eat up your savings

Keep in mind also that housing expense is about more than the mortgage, taxes and insurance. You’ll have maintenance and repairs, and that runs between one and five percent of your home’s value each year, depending on your home’s condition and location.

If there’s any doubt, don’t push the envelope. When determining an affordable payment, consider what you’re spending on housing now, and decide how much more you can afford to pay.

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How To Buy A House: 5 Home Buying Mistakes To Avoid