Unless you’re on the Forbes 100 list of richest people in the world, your home purchase may be the biggest financial investment you make during your entire lifetime.
Scary to think about, isn’t it? Yet it’s not really that scary or intimidating if you approach this investment as the wealthiest would if they were making a large investment in whatever it is that rich people might invest into.
Buying a home is a business transaction, entering into a legal contract, and to avoid costly errors along the way, it needs to be addressed as just that. This means performing careful research and doing your due diligence, absorbing all the information you can and keeping your emotions in check.
Let’s take a look at five common mistakes that homebuyers have the tendency to make within the home buying process.
Not Getting your Financing in Order
“Why does this matter upfront? We’ve just started looking after all.” I had that question the other day. While yes this couple had the down payment and could afford the loan, they ended up getting a pre-approval letter, yet until they had further conversations with their lender where they could understand better how things like their closing costs along with escrows for insurance and taxes translated into total dollars that would be needed as a cash to close figure, but also what their monthly payments would be on this dream home, they couldn’t completely get their minds around whether that payment would limit their other goals in life like traveling during their retirement years.
Yet, even though they had already fallen in love with their next ‘dream home,’ and bonded with it emotionally, they called me late last night just to say that they had to walk away from an offer they’d already made. That makes it much more ‘agonizingly’ difficult than if these steps were done upfront.
Obtaining loan pre-approval is the most important step to take during the home purchase process for all these reasons. It should be the very first step you take as well.
As mentioned in my story above, the mortgage pre-approval process lets you know how much you can realistically and comfortably pay for a home.
Just as you wouldn’t go car shopping without an idea as to how much you can spend and what that new car might cost you each month, don’t look at the first listing until you know what your budget truly looks like to your personal way of life.
Additionally, in a fast-moving seller’s market like we are experiencing, homeowners won’t even want a non-pre-approved homebuyer to look at their homes, much less submit offers. You’ll actually lose out to other home buyers competing for properties that you are looking at if you’re not prepared and they are with pre-approval letter in hand!
The good news is that today the process is relatively painless and not overly involved. It doesn’t cost you anything either, so there is no reason not to make your first home buying step one that leads you to a direct conversation with a mortgage lender. With that said, not all loan originators are equal. Get advice from your agent. There’s a reason agents have preferred lenders, home inspectors, contractors, etc…it’s because these are people that have performed, and tried by fire, they’ve made life easy and smooth on other sales over the years. An agent would never recommend you to someone they’ve known who dropped the ball before. Someone who blew it for another buyer they’d worked with in the past. They are only going to refer you to the best, most experienced, people no matter the need so listen to your agent and they’ll give you some great counsel!
Not Performing a Thorough Due Diligence
While the seller has a duty fill out and complete questions regarding the home in the seller’s disclosure honestly, you have a duty to protect yourself by performing various inspections after you are under contract and during due diligence, before you fully commit to purchase the home.
Hiring a professional home inspector to go over the home’s major systems is a must. In the past, inspections were just visual, yet today with infrared cameras some home inspectors even have the ability to see through walls! Beyond all that though, a capable and experienced home inspector may notice problems that the untrained eye won’t. They’ll also help alleviate any anxiety over potential red flags that you might see and are unsure about!
This would include other potential inspections such as inspecting for termites, radon, mold or air quality, etc… It also includes septic and other follow up inspections from HVAC to electrical if need be. Remember, the home inspector is like an ‘ER Doctor’ or ‘general practitioner.’ not an expert in all fields so at times they’ll refer you to some other trade or even possibly a structural engineer if they see some concerns they think you should delve more deeply into upon their inspection.
Judging the Book by its Cover
It’s easy to fall in love with décor and the seller’s style. This is why new home developments feature model homes staged by professional home staging companies. These homes are carefully staged to appeal to and draw out the consumer’s emotions.
By the same token, it’s easy to dislike a house because it’s messy, dirty or has dated furnishings and features.
It’s so important to remove your pre-conceived notions of what the perfect house will look like. Only then can you truly see a home for what it offers – both the good and the bad.
When out looking at houses, make sure you don’t allow the seller’s “Pinterest” perfect décor to make you forget what it is you want in a home. Conversely, don’t let the mess in a “less than show ready” listing cloud your vision of a home’s possibilities. Carpet can be replaced, walls can be painted.
Focus on the layout of the house and the “bones” of the home and not the aesthetic issues as it sits today!
Not Considering Additional Expenses
When you’re pre-approved for a home it’s tempting to buy at the top of your limit. Remember you don’t have to give in to the temptation however.
Go into house hunting know that when you purchase a home, you take on expenses you didn’t have before you became a homeowner.
If the house is in an HOA or homeowner’s association, you will likely have monthly home owner’s association dues. If the home has a pool you will pay to keep it up!
The ongoing maintenance of the home falls on your shoulders, so it’s important to leave enough room in your housing budget to take care of them. This is another reason too why that home inspection is helpful in giving you an idea of the age of the roof, mechanical, appliances, etc.. what to expect in terms of when down the road you’ll need to budget to replace that roof or furnace!
I always ask the seller of a home we have under contract for either copies of utility bills for the past year or an average of utility costs to get an idea of how much my buyers can expect to pay if they purchase the home.
To summarize, while these are some of the most common mistakes I see homebuyers having the tendency to make, they are in no way indicative of all of them. I’d like to help you develop a home purchase strategy that will avoid all of these mistakes and make your path to homeownership smooth!
Call me for a free home buying consultation and I’ll show you:
– How to get pre-approved for a mortgage (While shopping for rates and the best service with lenders who have proven themselves to be the best!)
– How to buy the right home for your needs
– What to put on your wish list
– The entire home buying process, from start to finish, in plain straight forward language!
It would be my pleasure to be of service to you and help in any way I can!