With low interest rates and the real estate market picking up steam, a lot of buyers are ready to get into ‘the game’ again. It’s true that it’s a great time to buy, but there are a few common home buying mistakes that can easily be averted with a little planning. If you are ready to take the leap into purchasing a home read on to find out what these common mistakes are and how you can avoid them.
Don’t Go Over Your Budget
When you are house shopping it’s easy to fall in love with a property that is just outside your comfortable price range. Don’t fall for this. Sure, $10,000 or $15,000 more might get you some fun stuff like a bigger master bathroom or granite countertops, but it’s easy to forget when looking at real estate that you’re dealing with numbers in the thousands or ten thousands…which is not just going over budget, it’s totally busting it. Many buyers forget that sometimes their financial circumstances may change, saddling them with a payment that they just can’t make. No one wants to end up in a place where they can’t make their mortgage payment….those small upgrades just aren’t worth the potential heartache down the road.
How to avoid this:
Get pre-approved for a mortgage before you start house hunting. This will give you a good idea of what you can afford and what the upper end of your budget will be. Once you are pre-approved only look at properties that fall within your budget. It’s always possible to negotiate a price down to a point that will work with your budget, but just be ready to walk away if that doesn’t happen. Sticking to your budget is hard, but worth it in the long run.
Don’t Buy a House if You Plan to Sell Again Soon
One common mistake that many buyers make is buying when they know that they’ll probably have to turn around and sell it in just a few years. Maybe you know that you’ll be up for that transfer at work soon, or, that you will be moving to be closer to your kids in a few years. No matter the reason, buying a house that you know you will have to sell in a short amount of time is never a good idea. Of course, some people are able to successfully rent a property, generating enough income to cover the mortgage. Additionally, second homes and vacation homes are often in markets where vacation rental programs are able to generate income with the property. However, for the average buyer, relying on being able to get the property rented for a good lease amount is generally a risky idea.
How to avoid this:
If you know you’ll have to turn around and sell your home in a few years, it might be more financially beneficial to rent until you are more settled. If you are purchasing a second home or a vacation home, research the local renter’s market to gauge its strength.
Don’t Forget About “Hidden” Costs
It’s easy to compare a lease payment and a mortgage payment, but that’s kind of like comparing apples to oranges. While it’s true that you will build equity in your house and not in a rental, there are lots of hidden costs to being a home owner that are not readily apparent to a new buyer. Homes require maintenance….and sometimes this can be expensive. There is no calling the land lord when an appliance breaks down, or you notice a roof leak. Do you have the funds set aside to deal with general maintenance issues? These added costs can really add up, and suddenly your mortgage payment is not as desirable looking as it once was. Additionally, property taxes, home owners insurance and home owner association fees can all be extra fees that buyers don’t calculate when deciding if they can afford a property.
How to avoid this:
Get a good home inspection so you know what kind of condition the property is in. You home inspector may be able to give you a good guess as to when major systems in your home, such as heating and air conditioning systems, will need to be replaced so you can plan accordingly. Additionally, be sure to research the past property tax liability for the property and calculate that into your monthly payment. If there is a home owner’s association be sure to find out what the yearly or monthly fees are, and add that in as well.
Don’t Skip the Home Inspection
This is an absolutely critical step of the home buying process that many buyers ignore. A home inspection will give you a good idea of what problems the property may have, and this can save you thousands of dollars as well as serious heart ache in the future. A good home inspector is trained to look for problems or concerns that the average buyer will not be able to spot…and sometimes an inspection reveals serious defects, such as structural problems, that should cause you to walk away from the sale. Buyers who skip out on inspections are placing themselves in a very risky position.
How to avoid this:
As soon as your offer on a property has been accepted by the sellers you should schedule a home inspection. This will give you plenty of time to back out of the sale, or have the sellers fix any issues, before you sign on the dotted line.
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