Buying a home can be stressful. Since homeownership has far-reaching implications, it’s important to keep your emotions in check and make the most rational decision possible. Finding a home at a price you can afford is likely your goal, so it’s important to avoid these house-hunting mistakes.
KEY TAKEAWAYS
- Be realistic about what you can afford, and tailor your search accordingly.
- Jumping in too fast or waiting too long to put in an offer are both risky in terms of cost and what kind of property you might end up with.
- Use the resources of a realtor or agent to search for homes or attend open houses.
1. Looking at More Than You Can Afford
If you can’t or won’t be able to afford the house you’ve found, you’re just hurting yourself by imagining yourself in it. Restrict your house shopping to properties in your financial range. Start your search at the low end of your price range. Remember, when you spend another $10,000 to buy a home, you’re not just paying an extra $10,000; you’re paying an extra $10,000 plus interest with your mortgage. High-end properties often come with additional costs such as higher property taxes and maintenance expenses.
2. Skipping Mortgage Pre-Approval
What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income. Make sure to be pre-approved for a loan before placing an offer on a home—or even before you go house-hunting in earnest. If you don’t, you’ll be wasting the seller’s time, the seller’s agent’s time, and your agent’s time if you sign a contract and then discover later that the bank won’t lend you what you need.
Be aware that even if you have been pre-approved for a mortgage, your loan can fall through if you do something to alter your credit score, such as finance a car purchase. If your actions cause the deal to die, you may have to forfeit any deposit or earnest money you put up when entering the contract.
Mortgage lending discrimination is illegal. If you think you’ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
3. Acting Too Soon
You’ll probably have to make some compromises to be able to afford your first home but don’t make a compromise that will be a significant strain. Unless you are a high-end buyer looking at custom homes, the chances are that you will be able to find a selection of homes in your price range.
Being open to continuing your search will save you from rash decisions you might regret later. Many real estate websites can help you streamline the house-hunting process, making it possible to preview hundreds of homes within a few hours from the comfort of your couch.
4. Acting Alone
Don’t walk into an open house without a real estate agent or broker. Agents are held to the ethical rule that they must act in both the seller’s and the buyer’s best interests. You may not be in the best bargaining position if you start dealing with a seller’s agent before having one of your own. Roughly 86% of buyers use a real estate agent or broker, according to a 2022 survey from the National Association of Realtors.
New rules for the National Association of Realtors, expected to take effect in July 2024, may lower commissions for home buyers and sellers. If a federal court approves the changes, the standard 6% commission ends and sellers no longer have to propose compensation to prospective buyers and their agents. NAR will also require brokers to enter into written agreements with their buyers to help consumers understand what services will be provided, and at what cost.
5. Lacking Vision
Distinguishing between what’s fixable and what is not is important. Even if you can’t afford to replace that hideous wallpaper in the bathroom right now, it might be worth it in exchange for getting into a house you can afford. If the home meets your needs in terms of location and size, don’t let physical imperfections turn you away.
At the same time, don’t be fooled by minor upgrades and cosmetic fixes that sellers have staged. Doing home upgrades yourself, even with a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.
6. Overlooking Flaws
Look for homes whose full potential has yet to be realized, especially if you’re on a strict budget. Don’t buy a fixer-upper that’s more than you can handle in terms of time, money, or ability. If you think you can do the work yourself but realize you can’t once you get started, any repairs or upgrades you plan to make should be in your budget.
7. Ignoring the Neighborhood
Don’t just focus on the residence—look at the surrounding area. It’s impossible to predict the future of your chosen neighborhood, but you should consider:
- What kind of development plans are in the works for the neighborhood?
- Is the street likely a popular rush-hour shortcut?
- Is there talk of a bridge or a highway to be built?
- What are the zoning laws in the area?
- Is there a lot of undeveloped land around? What is likely to get built there?
- Have home values in the neighborhood been declining or rising?
8. Rushing an Offer
It may be necessary to make an offer fast if you find a home you like in a hot market. However, don’t neglect the necessary steps, such as ensuring the neighborhood feels safe at night and investigating noise issues like a nearby train. Taking the time to weigh your decision allows you to research how much the property is worth and offer a reasonable price.
9. Dragging Your Feet
It’s a tough balancing act to make sure you make a careful decision, but don’t take too long to make it. The more time and energy you have to take out of your everyday activities to search for a house, the less time and energy you have available to meet other obligations. If you don’t pull the trigger quickly, someone else might, and you’ll have to keep looking. Don’t underestimate how time-consuming and routine-disrupting house shopping can be.
10. Offering Too Much
It’s easy for buyers to get sucked into a bidding war. If the house doesn’t appraise at or above the amount of your offer, the bank won’t give you the loan unless the seller reduces the price or you pay cash for the difference. When you sell the house, if market conditions are similar to or worse than when you purchased, you may find yourself upside down on the mortgage and unable to sell.
Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent’s opinion before making an offer.
Conclusion
Buying a home is one of the most significant financial decisions you’ll make. It’s important to stay level-headed and informed throughout the process. By avoiding these common house-hunting mistakes, you can ensure a smoother experience and make a sound investment in your future. Use the expertise of real estate professionals, be realistic about your budget, and take the time to thoroughly evaluate both the property and its location. This way, you’ll be well-equipped to find a home that meets your needs and fits within your financial means.