Common Home Buying Mistakes to Avoid
Not all major home-buying mistakes in a real estate transaction can be reversed, much less fixed before closing. If buyers goof up and make an innocent mistake, they might very well be stuck with the consequences for a long time or, worse, their deal might not even close. Their homeownership dreams may evaporate like the morning mist.
You have probably taken your time in selecting the home of your dream. You checked your credit and determined how much home you could buy. After working with your agent you applied and were pre-approved by a lender, and settled on the perfect house. You deposited your earnest money—funds deposited to prove you were serious about buying the home. Your closing was set for a few weeks in the future and you funded your escrow—funds held to pay the first portion of property tax and insurance. Now, all you have to do is wait for closing and dream about making the house your home.
However, this is not the time to let your guard down or make a mistake that could cause you to lose that dream home.
Refusing to Confide in a Trusted Advisor
Buyers—especially first-time buyers—need to have a trusted advisor to give them guidance on buying a home. This adviser could be your real estate lawyer or real estate agent and you should be completely honest with them. Sometimes, buyers withhold information for a variety of reasons such as:
- Fear of how they will be perceived
- The irrational belief they have all the answers
- Don't feel it is important enough
- Lack of confidence in their adviser
Experienced real estate professionals handle a multitude of transactions and personality mixes, so there's little they haven't heard before. Your advisers are representing your best interests and have a fiduciary responsibility to do so. They can't help you if they don't know what you are doing behind their backs. Plus, they will likely have a better idea for you than you can dredge up.
If you have cold feet and harbor thoughts about backing out of the transaction, talk to your agent about those feelings. They can help walk you through the anxieties. Real estate professionals will help you to determine if you really need to cancel and if so, manage the transaction so you can get your earnest money deposit back.
Altering Financial Pictures Prior to Closing
Changes in your credit or financial status can cause a problem when buying a home. Imagine this hypothetical situation. A young couple has qualified to buy their first home. At the time, they had no car payment and very little revolving debt. However, a week before closing, the couple bought a new car and financed the purchase. New debt to income ratios meant they no longer qualified.
Do not buy anything on credit or with a credit card once you have completed a loan application. Don't buy any big-ticket items such as:
- Washers, dryers, and refrigerators
- Lawnmowers or garden equipment
- Electronics or computers
- Furniture for your new home
Slight alterations in your credit ratios could cause an underwriter to throw out your loan and deny it. If your loan contingency has expired or been removed, you could forfeit the earnest money deposited when you decided on the home you wanted. In addition, you could lose out on the home altogether.
Buying the Wrong House
The very first thing home buyers should do is make a list of priorities they want in a home and define home purchase objectives. Figure out what features and benefits are most important and which you can live without. Before you close escrow, review this list. It's easy to overlook a major factor that could come back to haunt you later.
Don't get so swept up in the excitement of buying a home that you buy something that is less than you actually need. If the home has only one bath when you are a family that would work better having at least two baths, the purchase will not make you happy down the road. You may even be so unhappy you end up selling the home a short time after you bought it. The market could have changed between the time you bought and the time you sold, leading you to lose money on the deal.
Also, don't buy more home than you can comfortably afford. You may fall in love with a turn-of-the-century Victorian with high ceilings, sparkling chandeliers, and wide-planked floors, but if you struggle to pay the mortgage you will probably not be happy in the long run. Worse yet, you could default on your mortgage, giving you a headache for years to come.