The Top 10 Costly Mistakes Home Buyers Make

Homeownership is on the rise again. With mortgage applications surging and homeownership experiencing its first uptick since 2013, now seems like a good time to buy. But purchasing a house is a complicated process that’s affected by emotions as well as finances—especially if you’ve never done it before. So, if you’re planning to take the plunge, check out these common missteps first-time buyers often make. Learn to recognize and avoid them to keep your dream of homeownership from turning into a nightmare.

Pooh-Poohing Preapproval

Nothing’s as disheartening as finding the house you want, only to learn you can’t afford it. So before perusing properties, check your credit report and clean up any disputes you find. Then, gather your paperwork (W-2s, pay stubs, and bank and brokerage statements as well as that credit report) and get preapproved by a qualified mortgage lender. Preapproval—a bank determination of how large a loan you qualify for—establishes parameters that should keep you from looking outside your price range. Plus, when you’re ready to make an offer, preapproval can give you an edge over other bidders who didn’t take this step.

Neglecting Neighborhood Research

Greenhorn home buyers often wind up devoting so much attention to things like square footage, coveted original details, and the number of bathrooms that they forget to consider the neighborhood. If you have kids, investigate the school district and playgrounds; if you rely on public transportation, find out what’s available; if you’re a foodie, take a stroll through the grocery stores. As you’ll most likely be hitting open houses during the daytime, visit the neighborhood in the evening to confirm that it’s not too noisy and that you feel safe.

Being Unclear About What You “Want” and “Need”

Nobody’s perfect, and that applies to houses too. If you expect to find a place that satisfies every item on your wish list, you’ll be searching for a long time! Talk frankly with your family to decide what you absolutely must have—enough bedrooms for your brood, say, or adequate closet space. Then be realistic and flexible about other features, like that man cave or infinity pool.

Going Without a Pro

There are times to DIY, but finding and purchasing a home isn’t one of them. Professional real estate agents have access to the Multiple Listing Service, which can broaden—and fine-tune—your search. Plus, a pro who knows the ropes can help you stay within your means, facilitate appointments with sellers, negotiate your best deal, and guide you through lengthy documents. To find a real estate agent you’ll be comfortable with, talk to people you trust who’ve had a positive experience, or check the National Association of Exclusive Buyer Agents, a nonprofit that represents buyers.

Falling in Love Too Fast

Newbie buyers often fear that a home will get snapped up by someone else if they don’t put in a bid immediately. But it’s wise to shop around, even if the first place you see seems custom-made for you. Jumping the gun could lead you to overpay, or you could find yourself stuck with a white elephant with little resale value. So commit to viewing at least five properties before settling on the one.

Grabbing a Not-So-Great Deal

In a country still bouncing back from the mortgage crisis and Great Recession, purchasing a property in foreclosure or through a short sale can seem like a no-brainer. Yet what first-time buyers perceive as a below-market property may in fact be overpriced. Markets fluctuate, so it’s important to weigh a property’s historic value against current conditions. This is yet another reason to find a real estate agent with a solid grasp of the local market.

Ignoring the Inspection

An inspector will evaluate the structure, construction, and mechanical systems of your would-be home and, if anything is amiss, give you an idea what it will cost to fix. Rather than hiring someone your real estate agent suggests, pick an inspector on your own to guarantee objectivity. Check the credentials, background, and experience of any prospective inspector, and be present at the inspection, which runs three to four hours for the average-size house. (Be wary of anyone who says you needn’t attend or that he’ll be done in an hour.) Then, take the advice seriously. Don’t let an ample patio or your love of high ceilings cloud your judgment when it comes to structural issues. And before you go to contract, make sure the seller will correct any problems and bring the place up to snuff.

Forgetting to Factor in Hidden Fees

You’ve got the down payment and have secured a loan—great! Just prepare yourself for such pesky, pricey add-ons as taxes, insurance, utilities, appraisal fees, escrow fees, and other assorted closing costs. Also make sure you’ve got an emergency fund to cover repairs that you might encounter soon after moving in. Once you buy a home, you’ll probably be spending about a third of your monthly income on mortgage principal, interest, taxes, and insurance expenses, so budget accordingly.

Not Getting It in Writing

If you saw the house you want with all the accoutrements—appliances, window treatments, mantelpieces, light fixtures—don’t assume these items are part of the purchase price. Think about what you want the seller to include, negotiate for it if necessary, and ensure that it’s written into the contract. Otherwise you might find yourself having to pony up for a fridge on moving day!

Racing to Renovate or Refurnish

Chances are you’ll have to make a few design tweaks in order to make your home just right for you, whether that’s buying a modern living room set to jibe with your brand-new house or redoing a bathroom that’s still sporting decor and fixtures from the Nixon administration. Before tackling these projects—and further taxing your finances—live in the place for several months. In time you may find that your old furniture fits perfectly, the kitchen cabinets simply need a fresh coat of paint, and that paisley wallpaper is actually pretty cool!

Nina Malkin

 

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