- Spending too much money on a home makes your life harder after closing.
- Not using a real estate agent or getting preapproved puts you at a disadvantage compared to other buyers.
- Skipping the inspection before closing can leave you with expensive repairs later.
- See Insider’s picks for the best mortgage lenders »
It’s easy to make mistakes when shopping for a house. The emotions, time crunch, and pressure of making a big decision can cause you to overlook crucial details about a house.
Here are some common house-hunting mistakes — plus tips for avoiding them.
1. Looking outside of your price range
This one may seem like a no-brainer. Don’t buy a house that’s too expensive for you, right? But consider what it really means to borrow too much.
“The worst mistake, in my opinion, is working to keep your house,” Carolyn Morganbesser, Senior Manager of Mortgage Originations at Affinity Federal Credit Union, told Insider. “There’s no room for the movies or to go out to dinner, because your mortgage payment is higher than you anticipated.”
Think about what buying a home will mean for your finances after you close. Ideally, you’d want three to six months of expenses in savings to cover any emergencies. You should also know how much you’ll pay each month, then make sure the monthly mortgage payment won’t take up too much of your monthly budget.
2. Not using a real estate agent
A real estate agent is a valuable tool, especially in a hot real estate market. In the seller’s market today, the right real estate agent can help you move fast and make a competitive offer. They also help you navigate the fine print that comes with buying a home.
As you search for real estate agents, look for candidates who are Realtors. (Look for that capital R.)
All Realtors are real estate agents, but not all real estate agents are Realtors. Both are certified, but Realtors are members of the National Association of REALTORS® (NAR). This means they have to abide by a strict code of ethics, and they may even have additional certifications.
3. Not applying for preapproval early
When you apply for preapproval with a lender, the company gives you an official letter stating that it wants you to work with you. The company plans to lend you up to a predetermined dollar amount at a certain interest rate.
Why should you apply for preapproval early? Because showing a preapproval letter to a seller shows that you’re a competitive buyer who is in good financial standing. This can give you a leg up on other potential buyers who don’t have a letter yet.
Learn more and get offers from multiple lenders.»
4. Not clearly defining your priorities
Morganbesser recommended making a list of things you want in a house. Split your list into must-haves, things that would be nice to have, and things you can do without. For example, maybe you need four bedrooms, would like a a back deck, and could go with or without a fireplace.
You’ll need to define your budget, house size, and location. If you have kids (or plan to), you’ll want to learn about the school district.
You can also think about parking, number of levels in the house, and more things that will affect your decision. Then decide which factors are deal breakers and which aren’t.
Understanding your priorities can help you make a decision quickly, which is especially useful in today’s hectic market.
5. Not thinking about the future
Don’t just think about what your family needs now when shopping for a house. Think about what you expect to need in the future.
For instance, do you plan to have two kids? Then you might need three bedrooms. You also probably want to think about school districts now rather than later.
By thinking ahead, you can avoid the hassle and expense of selling this house to move into another one in a few years.
6. Skipping the inspection
When you choose a house, the lender schedules an appraisal. An appraiser visits the home to check out its condition and assess the value of the home.
An appraisal is not the same thing as an inspection. Don’t think that just because the home has been appraised, you don’t need to schedule an inspection.
You’re the one in charge of scheduling the inspection. This usually happens after you’ve made an offer, but before closing. The inspector tells you about any issues with the roof, plumbing, electrical system, and other big-name items.
An inspection lets you know what’s wrong with the house so you can decide whether to close, negotiate with the seller, or walk away and find another house.
Laura Grace Tarpley is an editor at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. She is also a Certified Educator in Personal Finance (CEPF). Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Source: Read Full Article