Buying a home can be a very exciting experience, but some people make the mistake of rushing into the process without taking the time to plan. This can put your long-term financial future in jeopardy, and quickly take the fun out of becoming a homeowner.
Save yourself a lot of heartache by avoiding these common home-buying mistakes. As a mortgage broker, we work hard to help our clients avoid these mistakes by educating them during the entire process.
#1 Ignoring the Pre-Qualification Process
The amount you think you can afford for a monthly mortgage payment may be different from what you qualify to borrow for a home.
As a result, it’s always recommended that you start looking for a new home by getting pre-qualified for a mortgage. When you are pre-qualified for a home loan, real estate agents and sellers take you more serious, and you don’t waste time looking for a home that’s not in your budget.
At Marimark Mortgage, we pride ourselves for being available to pre-qualify homebuyers 7 days a week, because it’s so important to the process of purchasing a home.
#2 Higher Monthly Mortgage Payment Than You Can Afford
The national economy is still trying to recover from the housing crash of 2008, which was largely a result of people with a higher monthly mortgage payment than they could afford.
It helps to plan out your monthly household expenses, many of which lending institutions may not consider in approving a mortgage. Itemize everything, including student loan payments, utilities, groceries, car payments, healthcare and car insurance, retirement account contributions, cell phone charges, and all of your monthly credit card payments. And don’t forget to include those major “once-a-year” expenses, such as vacations, vehicle maintenance, and annual insurance premiums.
When deciding on your budget for a monthly mortgage payment, consider all your monthly and annual obligations before making a final decision.
#3 Failing to Include Additional Expenses of Homeownership
First-time homebuyers often forget to include the additional expense of homeownership when calculating the total cost of purchasing a home. After all, they are new to the game of homeownership.
After several years of renting, you may not be aware of the additional hidden expenses involved in owning property. As a renter, you are not responsible for such things as property taxes, homeowner’s insurance, lawn care, or home maintenance issues, such as a broken water heater or a leaky roof. As a renter, these issues are handled for you by the landlord.
Also be aware that fees may be added to your monthly payment based on the neighborhood you choose to live in, such as homeowners’ association (HOA) fees. These fees can be costly, depending on the neighborhood, and the fees could increase periodically while you are living in the home.
At Marimark Mortgage, we help our clients review the expenses of owning a home, so they can take them into consideration when deciding how much to spend on a home.
#4 Unwilling to Compromise
Only the most affluent buyers don’t have to compromise to some degree.
First-time homebuyers often forget that a certain amount of compromise is usually required when buying a home. One helpful suggestion is to create a “wish list” and prioritize your “must-haves” and your “wishes”, then make sure they fit within your budget. Remember when considering a home purchase that you might have to make some minor home repairs, update the decor, or paint the walls to get the home you envision.
After you pre-qualify for a home mortgage and consult your real estate agent, you’ll have a better idea of the “must-haves” you can expect with your budget, and how much you might have to compromise.
Although it can be difficult, the most successful homebuyers often have a realistic vision and remain patient.
Buying a home is like buying any other big ticket item. Take time to establish a realistic budget, research what can be purchased with your budget, search for the home that best meets your wish list that’s in your budget, then negotiate the best price.
Patient homebuyers often get more of what they want in a home, while also getting more bang for their buck.
#6 Not Learning About the Closing Costs
Besides the down payment that’s required for most home loans, there are many expenses involved when processing such a complex transaction as a home purchase.
Different home loans have different requirements, so make sure to discuss the details of loan costs with your mortgage broker. Different types of mortgages can also have different fees associated with them, making it important for you to understand all the pros and cons of each loan product.
Here are some of the typical costs that can affect your loan, and your monthly mortgage payment:
- Property taxes
- Homeowners insurance
- Title services fee and lender’s title insurance premium
- Owner’s title insurance premium
- Credit report fee
- Notary fee
- Survey fee
- Appraisal fee
- Escrow fee
- Loan origination fee
- Loan application fee
- Home inspection fee
Government recordation fee and transfer taxes
- Attorney fee
- PMI insurance (FHA loan)
For more information about closing costs, read these 2 in-depth articles:
- What type of closing costs should you expect to see when buying or refinancing a home? This article reviews the different categories of closing costs, and tells you what to look for to be fully aware of the costs.
- Home Loan Closing Costs: This article goes into more detail about some of the closing costs.
#7 Skipping the Home Inspection
Homebuyers can be tempted to save a few hundred dollars by skipping a home inspection before purchasing a home. But this can be one of the biggest mistakes.
Besides the obvious reasons a homebuyer should get an inspection, and that it is required in some cases, Stephanie Christensen suggests 10 reasons you shouldn’t skip a home inspection.
- It Provides an “Out”
- Reveal Illegal Additions or Installations
- Negotiating Tool
- Forecast Future Costs
- Determine “Deal-Breakers”
- Learn to Protect Your Investment
- Reveal the Big Picture
Many of the areas we’ve discussed relate to the purchase and financing of a home, so we work with our clients to help them avoid these mistakes. From the beginning, we educate our customers on issues they should be thinking about while going through the process of buying a home.
When you get ready to buy a home, we would appreciate an opportunity to work with you, and help you reach your homeownership goals.