Choosing the Wrong Mortgage.
Many buyers have heard that the only mortgage to get, is a thirty-year fixed interest rate loan. That's because the generation ahead of you didn't have the tailor-made financial options buyers have today. Consider choosing an adjustable-rate mortgage (ARM) to take advantage of super-low interest rates. Or pick a ten- or fifteen-year fixed interest rate loan to maximize your deduction, and save you hundreds of thousands of dollars in interest. Or you might want to look into a two-step mortgage, which combines a little of the risk of an ARM with the dependability of a fixed-rate loan. Explore all the options. Have your lender show you on paper how much they'll cost you and how they compare with each other. Ask for a copy of a Good Faith Estimate (GFE). This document will allow you to compare lenders on an even playing field.
No one's saying you shouldn't take your time when finding the right house. You should. In fact, take all the time you need. Don't let your broker bully you into making a decision before you're ready to do it. Ask to see five, ten, or even fifteen homes if you haven't found one you love. The problem with indecisiveness is finding a home you would like to live in, but being afraid of making the commitment. Buyers often lose two or three homes because they can't bring themselves to actually make the offer. Or there might be two wonderful properties, a tough choice. If you're afraid, admit that fear and conquer it by talking with your broker. You're not the only buyer who's had trouble making up his or her mind. Remember, others have trod this way before.
Overextending Your Budget.
Although the lender who pre-qualifies you for your loan tells you you're able to afford a $200,000 home, buying in that price range may stretch your budget beyond the comfort zone. To avoid feeling pinched, it's important to understand how you spend your money. You may be comfortable spending 35 percent of your take-home pay on a house payment, or you may prefer to spend less-say, 25 percent. Write down everything you spend (down to that last piece of bubble gum) for two months. Can you live without buying your favorite group's latest CD? Would you feel uncomfortable knowing you can go out to dinner only once a month. That you must eliminate your yearly vacation. That your children can't have camp or piano lessons. Becoming a homeowner means you'll have additional expenses besides your mortgage payment. There's the maintenance and upkeep of the home, and property taxes. If you live in a condo, you may have assessments. Better to buy something less expensive that will give you greater peace of mind and allow for savings and a few extras. Do not buy a house, only to become "House Poor." Buy a property that will allow you to enjoy both the home, and still maintain a life outside that home.
Buying a Property That's Difficult to Resell.
Although you say you don't mind that the house backs up to the local railroad, you will when it comes time to sell the home. And it's unlikely you'll be able to easily convince another buyer just how quiet and peaceful life is there. When buying a home, try not to buy one that will be difficult to resell because even though you think you'll be there forever, you won't. Most buyers will end up selling sooner than they anticipate. The national average for time spent in one home, is about eleven years. This amount of time is much less for buyers with families, etc. Think hard about how you would sell this home before you buy it. Walk yourself through and point out all the negatives. Say them out loud. Then ask your agent or broker how long it would take him or her to sell it.
Operating on a First-House-Is-Best Theory.
Coming from a cramped, one-bedroom rental, or a house that you have outgrown, almost any home will look good. Try to avoid jumping at the first home you see. Look at five, ten, or even fifteen houses to see what is on the market. Season your eyes by inspecting these homes, their neighborhoods, proximity to shopping, or schools, etc. When you've finally narrowed down your choices to three or four, visit them again. By this time some form of objectivity should have returned. Now make your choice. Although some completely impulsive decisions work out, most do not, and you could wind up paying for this impulsiveness down the road.
Buying in an Area You Know Nothing About.
Sometimes home buyers fall in love with a house in a neighborhood that is inappropriate for them. Even though you'll live in the house, you'll have to travel through the neighborhood to et there. Is it a nice neighborhood? Is there graffiti on every wall? Are there gangs? Is there a neighborhood crime watch group? Are there families around the same age as yours? Is is a transient neighborhood, or do families stay there forever? To avoid making this mistake, spend a lot of time in the neighborhood before you buy. Drive to and from the house. Sit in your car and watch your future neighbors come home from work. Listen to how loudly their children play their favorite rock music. Walk to the local bar, restaurant, grocery store, and cleaners. Think about whether or not this neighborhood will make you as happy as the house.
Buying the Wrong Size Home.
Many buyers, especially those who are single and in their late twenties and early thirties, purchase one-bedroom condominiums. What they don't realize is how likely it is they will meet someone, fall madly in love and marry. Unless the girl next door has a condo you can combine with yours, that one-bedroom, one-bath apartment will soon seem too small. For the same price, and possibly even the same location, your dollars might buy a two-bedroom, two-bath apartment, which would give you additional flexibility. When you buy property, think about how long you intend to live there. Is this a five-year home? A ten-year home? Or, is this the home you intend to die in? The average American family changes residences every five to seven years. If you're in your twenties, it's likely you'll have significantly changed your lifestyle within five to seven years. Smart buyers plan for those changes ahead of time.
Looking at Homes You Can't Afford.
Buyers often hear that they can buy a home up to two and a half times their combined income. Heck, if interest rates stay in the 6 to 7 percent range, you might actually be able to push that number to three or three and a half times your combined income. Still, you have to factor in your debts, property taxes, insurance premiums, private mortgage insurance (PMI), and the down payment. The problem with looking at homes you can't afford is you'll get spoiled. When you finally come to your senses and start looking at homes in your price range, it'll probably be disappointing. For example, if you've been looking at four-bedroom homes with attached garages in plush suburbs, a three-bedroom home in a so-so neighborhood with street parking is going to seem, well, not quite nice enough. In order to save yourself the heartache, get pre-qualified through a local lender. Better yet, get pre-approved. There is little or no cost or obligation, and the lender will tell you exactly how much house you can afford to buy.
Most first-time buyers are renters. As such, the best time to close on a house is when your current lease ends. Don't sign another year-long lease if you expect to buy a home before that lease period expires; otherwise you'll end up with a dent in your pocketbook from writing rent and mortgage checks. If you can't time your closing correctly, approach your landlord about a shorter lease-say, three to six months in length. One alternative is a month-to-month lease; or you can ask your landlord to include an escape clause that will release you within 30 or 60 days.
the number one mistake made by home buyers...
Not Choosing an experienced, hard-working, ethical RealtorŪ to help you through the process!