What Are The Top Mistakes that Homebuyers Make?
(Seven minute read time)
Low mortgage rates make your mortgage payment more affordable and drive up the demand for local real estate. If you’re a first-time home buyer, don’t let the house-hunting FOMO push you into making any of these costly mistakes.
David Pipe and Rob Kent discuss the top 8 mistakes that homebuyers can make.
Not Getting Pre-Approved
So let's go through the top home-buying mistakes. The first one I want to call out for you is certainly going out home shopping without getting a preapproval, so without getting your financing in place. We all know that it's fun to go and home-shop, it's fun to look online, and it's great to go and see houses, but just like window shopping, if you don't have the financing worked out, you might not be looking at the right home for you, you might be wasting your time, and you might find a place you love, but then not even have enough time to get financing in place before the house is either sold to somebody else or before things move on. So definitely make sure that, if you're serious about home shopping, you figure out the financing part first so that you can make the rest of it really, really easy.
Buying Without Your Own Representation
Another mistake that a lot of people make is, and maybe a lot of people don't even know about this, but you can get your own representation as a buyer. So when you go to buy a home, you should have your own realtor representing you. There are a lot of people out there in the market right now who are trying to purchase a home through the listing agent. So the one thing to think about is, when that listing agent signs a contract, they're signing it with the seller. So they're not necessarily going to have your best interests in mind. They're going to be trying to get the most amount of money for their sellers. So definitely get your own agent to represent you and who is going to have your best interests in mind.
Not Doing Enough Mortgage Research
Number three, talking to only one mortgage lender. So just like when you go out and you're shopping for anything that's such an important purchase, that has such a cost and such a long-term financial commitment that you're making, talking to only one lender, so talking to only one bank or only one mortgage lender, just doesn't really give you enough confidence that you're able to really get what's out there that's best for you. So a mortgage broker can talk to many lenders for you. Some people like to talk to their bank and to another alternate source. But definitely shop around. Just like you shop around for houses, shop around for your financing. You're going to need to work with somebody that you feel comfortable and confident with and somebody who can give you the product and the service that matches up with your situation. So number three, make sure you don't just talk to one mortgage lender.
Waiting Years to Find Your “Perfect” House
Shopping around is definitely a good idea, but there has to be balance. Number four would be shopping around too long for your home, waiting for the perfect home. There are a lot of people out there who have been looking for years and years and they're waiting for the perfect home, whether they need a certain amount of bedrooms or bathrooms. It's about knowing what it is that you're looking for in a home, and if you see it, it's putting an offer in that you feel comfortable with. A lot of people will try to save up money to get the perfect home, but right now, in the type of market we're seeing right now, where homes are just going, the cost of homes is going up astronomically every month, you don't really want to necessarily wait. Yes, you want to get the right home, but waiting for the perfect home could run the risk of pricing yourself out of your perfect home.
Not Having a Budget
Speaking of pricing, number five is not having a budget, so not knowing your overall family budget. We talked earlier a little bit about knowing what you can get approved for, but have a budget. So whether you're buying for yourself, you're buying as an investor, or you're buying for your family, understand your big picture, your costs, and your incomes, and know that making this big financial commitment is not going to mean that maybe you can't have the dinner out that you wanted to have or do that show that you wanted to be able to do, or take your kids to that sporting event. Make sure that you can fit your lifestyle into your new purchase and that you're still comfortable with how things work out afterward. People talk about being house-poor, and in a market where prices are as high as they're going up, it can get really enticing to just go out and spend more than you planned. So that's understandable, but definitely have a budget.
Not Knowing Your ‘Wants’ vs ‘Needs’
Number six is not knowing your needs versus your wants when you're looking for a home. I'll ask somebody what they're looking for in the home and people say it's got to have a fenced yard, it's got to have a finished basement, it's got to have a basement, it's got to have carpet-free, and so many different things, no wallpaper, and I think when people are looking at a home, maybe they're just getting their needs and their wants kind of mixed up. When you're looking for a home, there are different things about, for your needs, if you have a large family, yes, I understand maybe you do need three bedrooms or four bedrooms, but at the end of the day, some of the things, like the fenced yard, well, if it doesn't have a fenced yard, you could build your own fence, or if it doesn't have a finished basement, you could, maybe, potentially get that basement finished the way you want it, and you never even thought about that. Would you want to pay for somebody else's basement or somebody else's renovations? So just keep those things in mind when you're looking for a home.
Not Asking About Your Mortgage Options
Number seven is, of course, back on the mortgage side, not understanding your options in the mortgage. So we talked about talking to many lenders, but also, you should understand, what are your choices? Can you prepay your mortgage? Can you move the mortgage with you if you decide to go somewhere else? Maybe you got a great rate and you want to port the mortgage, and do you know what those things mean? So make sure you ask and understand what your privileges are, because we all look at the interest rate as being the most important thing in your mortgage, but in fact, you'll find that the cost and the fees that you incur from an early cancellation of the mortgage or an early prepayment can drastically, drastically outstrip any savings you might've had from saving a few portions of a percentage on the interest rate. So definitely understand your options. How can you prepay? How much can you prepay, and how often? Will it cost you, and can you take the mortgage with you? Is that something you might want to do, knowing that the average mortgage, even though people sign up for five years, they often only quit, or they often break the mortgage after about three and a half years? So understand your options, as available, as part of your mortgage.
Being Unrealistic About Home Repairs & Renovations
Lastly, downplaying the flaws in a home and thinking that you're going to become an overnight handyman, and you're going to save all of this money on things that need to be done, like I mentioned in the last point, maybe it does have an unfinished basement, but if you're not that handy, maybe it is just looking into how much that renovation's going to cost. The last thing you want to do is start the basement and then have to rip it apart, and then hire somebody to do it. You've wasted time and you've wasted money. The other thing, too, is not just downplaying the flaws of a home, but even if there are flaws, and it's overlooking them. So right now, in the market we have right now, it's really tough to get a home inspection done in an offer, but you can always have that option of having a home inspection done prior to an offer, or even after, and I always tell people just to get a home inspection done, whether it's if you can get it in an offer, before an offer, or after an offer. Just know what needs to be done with your home, at the end of the day.
Next Steps
If any of these points are interesting to you or if you have questions, you can reach out to either of us for a no-obligation consultation. We're happy to help new buyers who are looking to figure out how to get into the home buying journey, how to get into the market, or if you're already an existing homeowner and you want to understand more about your options, either on the mortgage side or on the selling or buying side, please reach out and contact us. Thanks very much and we hope this was enjoyable.
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