The market is teeming with people who want to buy a home. Competition is stiff because there are far more buyers than sellers right now. Even in a more balanced market, there are land mines to avoid in home buying. Add the pressure of competition and you increase the risk of making a move you’ll later regret. Both first-time buyers and repeat buyers are prone to make errors. Read these top ten home buyer mistakes so that you can avoid them.

1. Going on your own rather than using a real estate buyer’s agent.

Some folks want to bypass getting a Realtor and simply go to open houses or search the internet and call multiple listing agents to see properties. A buyer’s agent works in your best interest and can educate you on parts of the process which you may have no idea exist. They can help you avoid pitfalls and negotiate on your behalf. Don’t underestimate the value of representation.

2. Starting the house search before getting pre-approval from a lender.

In today’s market, you’ll be grossly disadvantaged if you start a home search without pre-approval from a lender. Even if you bid on a home against just one other buyer, they’ll most likely be preapproved. A seller doesn’t want to risk accepting offers from someone who may not be able to afford their home. You’re offer is taken more seriously when you’re prepared with preapproval, so don’t delay that step.

3. Talking to only one lender.

Lenders and mortgage brokers can vary greatly in their offerings. Comparison shop to see who has the best loan product for your financial situation. If you go with the first lender you meet, you could be paying thousands more over the long haul. Visit at least three lenders to compare, preferably on the same day since rates can change quickly. Find reviews on lender responsiveness and customer service to put yourself in a good position for a smooth process.

4. Being unaware of hidden costs in home buying.

Most buyers focus on home price, down payment, and monthly payments. But have you considered taxes, insurance, appraisal fees, escrow fees, other closing costs, utilities, and yard maintenance? What if something breaks right after you move in? You need an emergency fund for repairs. Make sure you estimate all your costs and plan to budget around a third of monthly income on mortgage principal, interest, taxes, and insurance expenses.

5. Failing to assess “wants” versus “needs.”

Nothing brings on buyer’s remorse more than purchasing a house that doesn’t address your most important needs. The rush of excitement often attracts buyers to features that are less critical to their needs. Once they’re moved in, the small rooms bother them more than they did previously, or the kitchen set up is not ideal, or the closet space is inadequate. Maybe you found the perfect neighborhood, but the house falls short of basic expectations for your family. Invest the time to assess your “must haves” and weigh them against “nice to haves.” While you’ll probably have to compromise on some things, it’s best to choose a home that suits most of your critical needs.

6. Failing to do “due diligence” regarding a home’s surroundings.

The onus is on you as the buyer to do a certain amount of due diligence regarding community issues where your potential home resides. Find out the home’s school district to ensure it’s the one you want. Parents might be concerned about proximity to certain types of businesses or the presence of registered sex offenders nearby. Then there are other factors like crime rates or the potential for something like a large business being built behind your property. While a Realtor can help point you in the direction of where to find answers, it’s your responsibility to do the research.

7. Ignoring inspection findings.

It’s natural to be excited about an accepted offer. But don’t let the dreams of moving in allow you to neglect inspection findings. There are certain findings that are typical and easy to remedy on your own in due time. Then there are more expensive or worrisome findings that could require another inspection by, for example, a structural engineer. Your Realtor can negotiate with the seller to get problems fixed, but realize that if they say no, it might make sense to walk away.

8. Not getting a home warranty plan.

Home warranty plans can be purchased by either the seller or buyer. Typical things covered by most plans are plumbing, the water heater, duct work, the electrical system, dishwasher, refrigerator, oven range, and the HVAC system. The fee for the plan is usually nominal compared to the coverage it provides. It’s good to have a home warranty plan in place before you know what’s likely to go wrong in the first year of living in a new home. Under such a plan, when something breaks, there’s often a service call fee and then the broken item is either repaired or replaced.

9. Draining your savings for a down payment.

Tapping out hard-earned savings to buy a home is like choosing one poison over another. While doing so may help you put down 20% on the house and avoid the extra private mortgage insurance (PMI), it leaves you without any emergency fund and the need to start from scratch again on saving. Depending on your financial situation, it’s probably better to wait longer before buying to build up more savings. Or, you may just need three- to six-months’ worth of living expenses for an emergency fund and decide to pay PMI in lieu of putting down 20% cash. Weigh the terms of paying PMI vs. tapping out years of savings to buy a home. While paying PMI is not ideal, it’s usually a better option than depleting a retirement fund that has longer-term growth potential.

10. Buying a house that makes you “house poor.”

A lender will tell you how much you qualify for towards a mortgage for a house, but it is up to you to calculate all of your expenses (both current and new) and determine what you can reasonably afford. You shouldn’t aim for the uppermost range of the qualified loan amount if it leaves you very little left to cover regular and unforeseen expenses, not to mention discretionary spending. Choose the house that allows you to stay in good financial health. You can always aim for something more when the time is right.

Real Estate Term of the Week

House Poor: A term used to describe a person who spends a large proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance, and utilities. After all of these expenses, the home owner has little left for other expenses and discretionary spending.

Platinum Service Realty