Unless you’re Jeff Bezos, Bill Gates or Warren Buffet, your home purchase may be the biggest financial investment you make during your lifetime.
Scary thought, isn’t it? Not if you
approach this investment as the three wealthiest Americans would.
Buying a home is a business transaction
and, to avoid costly mistakes, it needs to be addressed as one. This means performing
careful research, absorbing knowledge and keeping your emotions at bay.
Let’s take a look at the five most common
mistakes that homebuyers tend to make.
Buyer Trap #1- Not Getting your Financing
in Order
Obtaining loan pre-approval is the most
important step to take during the home purchase process. It should be the first
step you take as well, and for several reasons.
First, 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 a clue as to how much you can spend, don’t look at one house until you
know your limit.
Additionally, in a fast-moving seller’s market, most homeowners don’t even want a non-pre-approved homebuyer to look at their homes.
It’s not a stretch, then, to understand that they most likely won’t entertain an offer from one.
Without that preapproval letter, you may
just lose the home of your dreams to another, pre-approved buyer.
The process is relatively painless and not
overly involved. It’s free, too, so there is no reason not to make your first
home buying step one that leads you over the doorstep of a mortgage broker or
bank.
Buyer Trap #2- Not Understanding the Loan
Process
Ask the lender about any charges and fees
that you don’t understand. This way, there will be no surprises at the closing
table. If a fee or charge sneaks into the closing documents you’ll notice it
and can take action.
Standard fees include document preparation
fees, underwriting fees, loan disbursement charges and others.
By law, the lender is required to provide you with a form called the “Loan Estimate” that includes a listing of all fees in advance of closing.
Never hesitate to ask if you don’t understand
anything on this form and don’t assume that there won’t be additional fees at
closing.
Then, at closing, you’ll receive the “Closing Disclosure” form that you can use to compare to the Loan Estimate.
Buyer Trap #3 – Not Performing Due
Diligence
While the seller
has a duty to you to answer any questions you have about the home honestly, you
have a duty to protect yourself by performing various inspections before you
fully commit to purchase the home.
Hire a
professional home inspector to go over the home’s major systems. While these
inspections are visual (nope, the inspectors don’t open walls), a capable and
experienced inspector may notice problems that the untrained eye won’t.
Even if you
decide that you want to purchase the house no matter what, it’s much better to
know about these problems up front so that we can negotiate a lower price or
cash back at closing for repairs.
Buyer Trap #4- Judging the Book by its
Cover
It’s easy to fall in love with décor. This
is why new home developments feature model homes. These homes are carefully
staged to appeal to 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.
Don’t allow the dazzling décor to make you
forget what it is you want in a home. Don’t let the mess cloud your vision of a
home’s possibilities. Carpet can be replaced, walls can be painted.
Focus on the layout of the house, and not
the cosmetics.
Buyer Trap #5- Not Considering Additional
Expenses
When you’re pre-approved for a home it’s
tempting to buy at the top of your limit. Don’t give in to the temptation.
When you purchase a home, you take on
expenses you didn’t have when you rented a home.
If the house is in a managed community you
will likely have monthly home owner’s association dues. If the home has a pool
you will pay for maintaining it.
Many renters don’t pay for water but
homeowners typically do. 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.
I always counsel my clients to ask the
seller for copies of utility bills for the past year to get an idea of how much
they can expect to pay if they purchase the home.
While these are the most common mistakes
homebuyers 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
more.
Call me for a free home buying
consultation and I’ll show you:
– How to get pre-approved for a mortgage
– 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 English.
