Although it can be an exciting experience, buying a home is ranked as a top stressful life event. According to the American Institute of Stress’ Holmes-Rahe Stress Inventory, taking on a mortgage is more stress-inducing than a child leaving home, work demotion or loan foreclosure.
It’s no wonder – home buying is a huge monetary investment with many decisions that need to be made. One misstep can cost thousands of dollars. However, with a little foresight and pre-planning, you can have everything in place before you walk into the future home of your dreams.
This article presents steps that inform you so you can make decisions that sidestep mistakes when buying a home to make buying a home exciting and as stress-free as possible.
Avoiding Mistakes when Buying a Home
1. Create a Long-Term Budget
Determining home costs not only saves you money, but it could also save you heartache further into the buying process. If you’re first-time buyer, you may not realize that the cost of the mortgage is just one part of home ownership financial responsibilities. You also should consider:
- Property taxes
- Home owner’s insurance
- Increased water and utility costs
- Home Owner’s Association dues
Most home listings include the property taxes and home owner’s association fees in the price, so you’ll know what to expect. Some may also include the average costs of utilities in the pricing—and your realtor will know several insurance carriers so you can call ahead to see what the cost of insurance will be on home values that are within your price range.
Knowing the comprehensive costs of home ownership will help you pinpoint just how much house you can afford and avoid this common mistake when buying a home.
2. Prequalify for a Mortgage Loan
If you’re like most Americans, you don’t have enough cash to buy your own home. This means you must have a mortgage loan to pay for a home. Before you speak to a realtor or attend an open house, contact your banking institution to complete the process to pre-qualify for a loan.
To prequalify, you must submit a completed application and provide income verification – W-2s and pay stubs. The lending institution will also ask about whether you have a down payment and complete a credit check to ensure you are a good lending risk to prequalify you.
When you are prequalified, there are several benefits:
- It narrows price range so you can focus on a specific range of homes.
- You are considered a serious buyer by sellers.
- It streamlines the buying process.
3. Hire a Qualified Real Estate Agent
This is an important move because a real estate agent understands the real estate market in your area, how to process the complicated paperwork and can provide independent advice about all aspects of the buying process.
Get a referral from friends and family for realtors who’ve provided them with outstanding service in the past. If your family and friends can’t provide a referral, call at least three agents and ask them about their qualifications, what’s unique about their service and whether they can provide referrals. Choose the one that has the best referrals, qualifications and who you believe will work well with you.
4. Research Neighborhoods Before Buying
The internet is a great place to find neighborhoods where you’d like to live. You can discover whether the neighborhood has the amenities you want, like schools, nearby hospitals or whether it’s walkable. You can also see crime statistics for a city or neighborhood by performing a Google search.
This move helps you save time so you can focus on only the neighborhoods that appeal to you.
5. Don’t Get New Loans Before Your Mortgage Loan Closes
Making this mistake when buying a home could jeopardize your entire home purchase by lowering your credit score.
When you apply for a mortgage loan, your financial status is scrutinized. Prior to a loans’ closing, the lender pulls a credit report to ensure that your financial standing hasn’t worsened.
Credit scores are impacted by several variables, including the amount of available credit you have. This is determined by:
- Your income
- How much total credit you can carry based on income
- Your current credit liability
- How much credit you have available
Keep in mind that a lender will factor in the amount of your mortgage loan into this formula. When you add a large credit card purchase or new loan; it will reduce your credit score because you have less available credit.
Avoid these five mistakes when buying a home for the best chance of enjoying the experience of buying the home of your dreams.
Remember, you can take one additional step to ensure that you’re buying a home in a thoughtfully designed community by choosing a home built by a quality home builder. Ensure they are focused on ensuring their clients’ satisfaction, and able to customize homes that meet your needs in a flourishing community.
