Buying a home is an exhilarating experience, and often one of the most significant financial decisions you’ll make. Successful buyers are careful to research the housing market, consult with lenders, and interview Realtors® before they check home listings. You too can avoid the biggest mistakes average buyers make when purchasing a home.
In this article, you’ll learn the top 10 mistakes people make when managing the most critical professional, personal, and financial decisions involved in the home buying process.
1. Looking for Homes Without Consulting a Lender
Getting prequalified for a loan is one of the most important steps you can take before scanning the market for opportunities. Getting preapproved will solidify your budget and help you move quickly on your dream home.
Sellers want to see that you’re financially qualified. You will need to know if you’re approved for 100% of financing or a lesser amount—which could result in a larger down payment. When buyers seek out lender pre-approval, they place a stamp of authenticity on their search. This important step lets Realtors® and sellers know that you’re serious about buying a home. Pre-approval, most importantly, clarifies exactly how much house you can afford. Looking at homes without a clear financial picture can cause buyers to fall in love with a home outside their price range, and set them up for disappointment.
2. Setting Expectations Too High
Buying a home isn’t the same as picking out your favorite products at the grocery store. And you might be wary, especially when making such a large purchase, of anything you don’t love in the home. Try creating a list of your needs versus wants to choose the right home for your budget. This list should provide transparency and narrow your search.
If a home fulfills 75% of your expectations and everything in the “Needs” category, it might be a solid investment. Pick out multiple homes, cross-reference your must-haves, and choose one that meets essential criteria.
Buyers who wait could end up losing one of their favorite homes because they’re trying to meet unrealistic expectations. Speak with your Realtor® about your timeline, market conditions, and specific needs so they can provide practical insight and recommendations.
3. Choosing the Wrong Real Estate Agent
Employing the right real estate agent can save you precious time, money, and stress. Agents aren’t there to merely find potential properties or guide you through the process. The right agent is a tough negotiator, expert in the local market, and legally proficient. The difference between a good and a great agent could be expensive.
Effective agents display some, if not all, of the following traits:
- Integrity
- Industry knowledge
- Market Awareness
- Communication Skills
- Marketing Mastery
Finding the most effective agents is easy using AgentStory’s MatchIndex™ score to compare local agent data. Combine this technology with agent interviews to ensure a personality match. Above all, take your time when choosing someone to represent and guide you. Agents will lobby for your best interests and pave the way for a seamless transaction.
4. Using the Home’s Online Value
When you see a home’s online value, don’t believe that it’s static. Online values are used to provide a rough estimate. According to Investopedia, popular home value websites cannot keep up with every shred of data in the real estate market. There’s just too much data to compute, such as comparable properties, basic home details, taxes, and home improvement upgrades.
Buying a home should only come after a comparative market analysis (CMA) is completed by a real estate agent. CMAs will analyze every piece of data in real-time to determine an appropriate value. The housing market moves quickly, so using a trusted real estate advisor will significantly increase the value accuracy.
5. Assuming the Home’s Value Will Increase
Real estate can be a lucrative investment. However, it does carry risk. The housing market doesn’t always appreciate, and buyers should understand that before making a large purchase. Buy your home for the right reasons, and hope that the market conditions favor your investment over the long term. It’s tough to predict housing market trends, so do the best research you can and buy when it makes sense for you and your family.
6. Underestimating Homeowner Expenses
When you decide to purchase a home you might be surprised at the true cost, especially if you’re a first-time homebuyer. There are many expenses associated with buying property, including home inspections, appraisals, escrow accounts, and other closing costs, sometimes totaling around 2-5% of the loan’s value.
Another consideration is repairs and maintenance on the home itself. According to Discover, the average homeowner should budget one percent of their home’s value every year for maintenance and repairs. These expenses, among others, can put homeowners in a pinch without proper expectations.
7. Moving Too Fast Through the Homebuying Pipeline
It’s hard to slow down when homes are flying off the market, and you’re facing simultaneous pressure from family, friends, lenders, and agents. Relax, you got this. Buying a home is one of the largest financial decisions you’ll make, so take the time to choose an outstanding Realtor®, converse with lenders, and shop around. The only time limitations you have are your own, so don’t let others dictate your movement through the pipeline if you’re unsure. Weigh your options carefully so that you won’t regret the purchase later.
8. Buying a Home in the First Place
When you’re ready to purchase a new home, it’s easy to get caught up in the fanfare. Ask yourself, “Why am I buying a home in the first place?” or “Will I be able to keep up with the mortgage payment and additional fees?”
New homeowners can find themselves struggling to make ends meet without the proper considerations. Also, if you’re the type of person who enjoys moving every year, a home might not be the best investment. Explore your reasons for purchasing a home, the resources at your disposal, and the timeline of your ownership. Answering these questions will help you make the right decisions with a clear conscience.
9. Relying Too Much on What Family and Friends Think
Making a large purchase is challenging, so we naturally gravitate towards others’ opinions. However, what your family and friends think about a home isn’t nearly as important as what you think. Outside opinions can sway you in different directions and ultimately hurt your chances of getting the home you want.
Constructive feedback can bring value, so it shouldn’t alienate important solicitation. The person who will be making repairs, payments, and living in the home is you—that’s the person who ultimately should decide. Trust in the professionals you’re working with to give you their advice on pertinent issues. Try to leave other unaffiliated parties out of the decision-making process unless you absolutely need a second opinion.
10. Going on a Shopping Spree When You’re Pre-Approved for a Mortgage
When you’re pre-approved for a mortgage, it’s understandable to start shopping for new furniture, plan renovations, and consult with professionals to make the new home a home. All of these large purchases typically require additional credit usage. Any negative marks on your credit report can affect your pre-approval. While under contract, keep your credit stable.
When you’re in underwriting, right before you close, your credit will be pulled again. If your credit has gone down since the pre-approval, it could result in a non-qualifying score. Be mindful throughout the process, and don’t overextend yourself before closing (or at all for that matter).
The Bottom Line
Successful real estate transactions occur when you manage your financial, professional, and personal expectations. The price tag on a home can jump when closing costs, Realtor® fees, and repairs are added to the bottom line. The process starts with a preapproval from a lender and the right real estate agent.
Once you’ve started the process, relax, and take a moment. Try not to rush to the basket without dribbling the ball. Temper expectations and ensure the influence of family and friends is minimal. Check in with yourself along the way. Ensure the home meets all of your needs and at least a few of your wants. Be mindful of big spending or hard credit pulls before you’ve closed. Most importantly, remember to have fun; this could be your final home purchase!
