House hunting can be an exciting but overwhelming process. Buying a home involves many big decisions, which means that there’s potential for many big mistakes. Whether you are in the market to purchase your first home or you haven’t bought a house in years, avoiding these common homebuyer mishaps will ensure you feel confident when it’s time to close the deal on your home.
Not knowing what you can afford
It’s all too easy for emotions to take over when shopping for a new home. People tend to shop at the higher end of their budgets to secure their dream house, but rarely do they consider the additional expenses that come with owning a home or what happens if their income unexpectedly changes.
To avoid biting off more than you can chew, be sure to get preapproved for a mortgage before you go house hunting. This will not only show realtors and home sellers you are serious about buying but will also ensure you don’t end up purchasing a home out of your price range.
Not considering additional expenses
Even if you can afford your monthly mortgage payments, homebuyers can quickly become house-poor if they don’t budget for the additional costs that come with owning a house. Once you factor in things like home insurance, property taxes and maintenance fees, you may find yourself in over your head with expenses.
Before you close the deal on a home, ask the homeowners what their average utility bills look like and get a quote for homeowner’s insurance rates. Experts also recommend that you budget 1% of the home’s purchase price annually for upkeep expenses.
Not saving for a down payment
It can be frustrating to have to wait and save money to purchase your dream home, but it may also be in your best interest. A small down payment may be tempting – especially if it’s what you can currently afford – but may cost you more in the long run.
A larger down payment ultimately means a smaller mortgage and lower monthly payments. What’s more, is if you put less than 20% down on a home, your loan is considered risky. Homebuyers will have to pay for monthly private mortgage insurance until the equity in their home exceeds 20%.
Buying a home is an intimidating process. However, by avoiding these common homebuyer mistakes, you can ensure that the house of your dreams doesn’t become a financial nightmare.