Seven Home Buying Mistakes to Avoid
More and more first time home buyers have come flooding into the market;
as a result, rates of home ownership have never been higher than they
are today. While many of these first time buyers will end up with the
perfect home at the best price, many others will fall victim to a number
of common home buying traps. It is vital for all potential home buyers
to learn these common mistakes and try to avoid them if possible.
Some of the most common home buying mistakes including:
Mistake #1 - Blindly following the home inspection provided by the listing agent
While a home inspection is always a good idea, it is important to not
rely solely on the inspection provided by the listing agent. The cost of
the average home inspection is quite small especially compared to the
cost of the average home. It is a good idea to have your own independent
home inspection done, and to carefully compare the results of that
inspection with the results of the agent's inspection.
Unfortunately, few states have stringent regulations on home inspectors.
Therefore, it is recommended to choose a good and reputable home
inspector that belongs to the
American Society of Home Inspectors,
who has completed at least 250 home inspections.
Mistake #2 - Taking the wrong advice on how much you can afford
The first question most home buyers will have is how much home they can
afford to buy, and there are plenty of people and businesses out there
how are all too eager to offer an answer to that question. It is
important to carefully consider the possible vested interests of those
who tell you how much you can afford.
Neither the listing agent, real estate broker nor the lender will truly
know how much you can afford. While they may be able to provide some
guidance, it is vital to make sure that the mortgage payments are truly
affordable to you. You should be the one that decide on how much you
want to borrow and how you want the loan to be structured.
Mistake #3 - Taking out a temporary loan
Many home buyers are turning to these dangerous temporary loans in order
to afford the ever increasing cost of homes. The idea behind these
"temporary" loans, be they interest only loans, negative amortization
loans or one of the other new exotic mortgages, is that you get a low
payment up front, and the ability to refinance the mortgage before the
real payment kicks in. This can be quite a dangerous strategy, and for
many first time home buyers it could spell financial disaster.
While these loans can provide a low monthly payment for a couple of
years, in many cases they also mean the home buyer will be gathering
little or no equity, or in the cases of a negative amortization loan,
falling further and further behind. If home prices were to fall, or even
to stagnate, the buyer could easily find him or herself owing more than
the home is worth.
Mistake #4 - Opening or closing credit accounts
Opening and closing credit accounts can also be dangerous when it comes
to buying a home. That is because mortgage lenders will want to have a
good look at your credit score, and your credit score could be
negatively affected by changes you make in the number of credit lines
you have outstanding.
Closing long standing accounts could lower your credit score, since
one of the factors affecting the credit score is the age of the
accounts. Opening new accounts could also send up a red flag, and cause
mortgage lenders to see you as too great a risk.
Mistake #5 - Not checking out the neighborhood
Buying a home in a bad or undesirable neighborhood can be a big mistake,
as the location of the home can have a huge impact on its resale value.
Even if you do not have children in school, or plan to send the kids to
private school, the quality of the local public schools will be a huge
factor in the value of the home. You simply cannot afford to overlook
the nature of the neighborhood when it comes to buying a home.
Mistake #6 - Buying before you are ready
Many people have been spooked into buying now out of anxious that
perhaps home prices will continue to rise and become completely
unaffordable. It is important to avoid buying a home before you are
ready, and not to simply jump into the market out of panic.
Mistake #7 - Not buying when you are ready
Likewise, many home buyers make the opposite mistake by sitting on the
sidelines when they are perfectly capable of buying the home they need.
A home is much more than a place to live - it is a very valuable asset and
an investment in the future. Throwing money away on rent, when it
is not necessary, is perhaps the biggest housing mistake of all.