The Biggest Mistakes Homebuyers Make
Posted by Lee Cameron on Friday, April 23rd, 2010 at 9:51am.I'm happy to say that there are a lot of new people out there looking to buy a home. With the prices down and the inventory up, so many people are finding the current market to be a great opportunity - especially first-time homebuyers (who have been taking advantage of the tax credit) and retirees (who are finding it affordable to retire to Florida again!).
Our recent economic woes have also lead to a new trend - more cautious buyers. That's a good thing. Making a mistake while buying a home can be a devastating error that you live with for many years to come. So what are the most common mistakes that homebuyers make? I'm glad you asked, reader. I happen to know and I've got six of tips to help you avoid them.
1 - Know What You Want, and What You Can Afford
Let's be honest, what we all want and what we can all afford are usually two very different things. However, it's important to know what it is you want and exactly what you can afford before you even start to look for a home. Start with the easy stuff: what you want. How many bedrooms? What area of town? One story or two? Do you want a big yard for the dogs or a small yard to reduce mowing? Do you need to be close to work or school? How about a pool? Make yourself a list of all the things you need in your new home and all the things you'd like in your new home. Next, go see a lender and find out exactly what you can afford. Armed with this information, give yourself a realistic price range and only request to see homes that have the things you want and are in that price range. Don't look at homes you know you can't afford. It will just make the more affordable homes seem less attractive. The better handle you have on what you want and what you can get, the easier it will be to find that perfect home.
2 - Know What Your Credit Score Is
Quick, what is it? Do you know your credit score off the top of your head? Well, if you want to buy a new home, you should. The lower your FICO score, the more it will cost you to borrow. Find out what your credit score is and, if it's low, do everything possible to raise it before you start looking for a home. If you want a target, remember that Fannie Mae and Freddie Mac charge higher up-front fees for borrowers with a credit score less than 740. If you have a lower score, you're also stuck with higher interest rates. Get that score up now and you'll be better off in the long run.
3 - Don't Buy a Car!
Don't buy a car, don't open up a credit card account, don't make any big purchase when you're gearing up to buy a home. Why? Many people don't realize that when they get an auto loan, or open up any kind of new credit account, their FICO score often drops. Lenders will be watching your credit score constantly up until your closing and if they see any sudden changes, they're likely to call off the whole deal. Wait to make those big purchases until after you've closed on your new home.
4 - Get a Home Inspection
I know, everyone wants to find ways to cut corners and save money. I'm all for that. But don't do it with the home inspection. It's true, oftentimes you'll pay to have the home inspected by a professional and they'll find nothing significantly wrong with the home. But when they do find something, believe me, it's worth the money. Many times, issues and repairs can be taken care of under contract if the sellers are willing. And if they're not, at least you know what you're getting into before you sign on the line. Get the home inspected. If you don't, you might find out about a big problem too late, and then the cost of repairs are usually much, much greater than the cost of an inspection ever would have been.
5 - Have a Way Out
As a buyer, you'll always be required to put some money down as a deposit when you sign a sales contract. If you decide on a whim to cancel the deal, this money is usually nonrefundable. However, most contracts include certain common conditions where the buyer can cancel and receive their money back. These conditions include things like finding a major problem during the home inspection (see, I told you they were important!), having the home fail to appraise or the buyer failing to obtain financing. These are common causes for cancellation, but many sellers will try to leave these conditions out of the contract so that they can keep your deposit no matter what. Don't fall for it. Read your contract carefully and make sure that there are clear and reasonably conditions for you to escape from the deal without penalty if something serious goes wrong.
6 - Don't Forget Insurance
In the rush of buying a home and making sure that you can afford the initial transaction, many buyers completely forget about what comes next - insurance. Before you buy that home, make sure you know how much it's going to cost you to insure it. Remember, a mortgage you can pay off, but insurance is forever. Don't get stuck in a new home that you suddenly find out you can't afford to insure. Know what you're getting into ahead of time.
Most of these tips are basically common sense. Just remember, buying a home is probably the most important financial decision you'll ever make in your life. Don't rush it. Take it slow and careful. Make sure you plan for every contingency. Make sure you understand every step of the process, and if you don't, talk to a professional who does. Make sure you know exactly what you're getting into before you sign anything. And if you need help with anything, you know who to call!
Print
ShareBe the first to comment on this blog entry!