For most people, a home is the largest purchase they’ll ever make, so choosing the wrong property can have disastrous implications on your wallet and well-being. Buying a home is not an impulse buy. In most cases, you will have a few months’ notice before you actually go through with the sale. Planning ahead is critical particularly if you don't have extensive financial resources. Whether you’re a seasoned or first-time buyer, here are a few home-buying mistakes to avoid.
1. Altering your financial pictures prior to closing
Do not make any major purchases or move money around until you're settled in your new home. When you make a major purchase, you limit the amount of money available for your down payment and decrease the amount of liquid capital in your name. Also, moving your money around could make it more difficult for the lender to properly document and measure your finances. So leave your money where it is until after closing.
2. Getting too attached to one property
In competitive markets, you may have to put in offers on several properties before one is accepted. Some buyers get so infatuated with one property that a rejected offer hits them hard. It’s okay to feel anxious, but you need to be able to fall in and out of love during a home search. If you find a home that you think is perfect for you and you don’t get it, you can’t stay down too long. You have to recognize that wasn’t the house for you.
3. Skipping the home inspection
Home inspections are not required when buying a house and some sellers can rush the process and discourage an inspection. But buying a house without an inspection is extraordinarily risky because serious problems can exist with the electrical wiring, the plumbing, the roof, or the foundation. An inspector can identify problems before the closing, and you can then ask the seller to fix these problems. If you buy a house and skip the home inspection, you’re financially responsible for any problems that arise after closing.
4. Buying the wrong house
As a home buyer, the very first thing you should do is make a list of priorities and define home purchasing objectives. Figure out what features and benefits are most important and which you can live without. Before you sign on the dotted line, review this list and make sure the house you are about to purchase meets your requirements. It's easy to overlook a major factor that could come back to haunt you later.
5. Maxing out your spending power
Qualifying for a half-million-dollar mortgage does not mean you should buy a mansion, it is therefore wise to be a little more conservative. Homeowners have additional expenses such as property taxes, condo fees, and maintenance that renters do not. However, some first-time buyers fail to budget for these extra costs and assume they can afford a monthly mortgage equivalent to the rent they paid.
One buyer purchased a home that cost him about $100,000 more than he was comfortable spending. But he fell in love with the Victorian character: the high ceilings, sparkling chandeliers, and wide open space layout. A year later, he could no longer afford to make his mortgage payments. The house was too expensive for him to maintain. He would have been better off buying a smaller home in a more modest neighborhood. But he let his soaring emotions cloud his good judgment. Make sure you do not go beyond the budget you assigned for the home purchase.