Buying a home is exciting and terrifying. After all, this is the biggest financial move most people ever make. As such, there’s a lot of room for error, and even tiny mistakes can translate to tens of thousands of dollars.
The lesson here: Even the most intrepid home buyer should get some guidance not only on what to do, but also what not to do. Look no further than this list, which highlights the most common mistakes buyers make so you can avoid the same fate.
1. Don’t shop for homes without an agent
By all means, start out by looking online at pictures of pretty houses—the more the better. It’s a vastly useful way to get the lay of the land. But when it comes time to get serious about buying a house, you should find a professional to help you out.
Think of a buyer’s agent as a fairy godparent who’s here to turn your homeownership dreams into reality. This person will guide you through every step of the home-buying process—from finding the right property and writing a winning offer to negotiating home inspection repairs and sailing through to closing.
2. Don’t meet with just one mortgage lender
Once you’ve found a real estate agent, your next step should be to get pre-approved for a home loan. To do that, you’ll have to meet with a mortgage lender and provide a good amount of paperwork, including two years of W-2 forms, two years of tax returns, and proof of funds for the down payment (among other documents).
Typically, your buyer’s agent should have a good relationship with several reputable lenders who he/she may recommend. It is in everyone’s best interest that the buyer’s get the best interest rate they can find because that will be key in deciding the buyer’s buying power.
3. Don’t understate your budget
It might sound strange, but a number of home buyers make the mistake of hiding their true budget from their real estate agent.
Some people are afraid that their agent is going to make them buy the most expensive house that they can afford, so they understate their price range. However, if you’re not upfront with your agent about your price range, you might miss out on a great house.
For example; if you communicate that your budget is $300,000 maximum but you’re actually willing to pay $400,000, your agent may not send you listings that could actually be a good fit for you,.
4. Don’t hold out for the ‘perfect’ house
People throw around the words “dream home” a lot. However, here’s the not-so-harsh truth: There’s no such thing as a perfect house. There will always be a bigger and better one out there. And thats why you should create a list of “musts” and “wants” to identify their criteria and focus on what really matters to you.
5. Don’t make ridiculously lowball offers
You obviously want to get a bargain, but you could lose out on a home that you love by making an absurdly low offer. In fact, a recent survey from Inman found that 15% of real estate agents say the third-largest mistake people make when buying a home is offering too little for a property (that’s behind not talking to a lender first and waiting too long to make an offer).
When you overlook market data and make a lowball offer, you’re pretty much slapping the seller in the face, and if you offend the seller, the person might not even be willing to make you a counteroffer.
Bottom line: Trust your agent to help you assess the value of a house and write a winning offer.
6. Don’t forget to budget for closing costs
The home seller will chip in some money at settlement; however, as the home buyer, you have the (unfortunate) pleasure of shouldering the lion’s share of the closing costs. Your mortgage lender should be able to give you a rough estimate of your closing costs once a seller accepts your offer, but as a rule you can estimate that they typically total 2% to 7% of the home’s purchase price. So on a $250,000 home, your closing costs would amount to anywhere from $5,000 to $17,500.
7. Don’t make big purchases before you close
Once you have found the right house and get the seller to accept your offer, your loan still needs to go through underwriting in order for you to obtain the mortgage. One thing underwriters do is look at your credit score from the three major credit bureaus—Experian, Equifax, and TransUnion—to make sure your credit hasn’t changed since you were pre-approved.
When in doubt, ask your real estate agent for advise. I hope this information was helpful. If you have any more questions about the buying process feel free to reach out.
