Purchasing a property is probably the most significant investment you're about to make. And it's quite normal that your emotions come into play with such a huge and personal purchase. Especially for first-time buyers, buying a new place can seem overly complicated and even confusing.
Instead of only focusing on finding your dream home or being a home improvement expert, you should be as rational as you can with your decision, no matter how personal this purchase is. Knowing what problems to expect, you can avoid expensive errors and feel more confident while shopping.
Here are the 5 most costly mistakes buyers keep repeating (but you don't have to):
#1 Skipping Mortgage Pre-Approval
Pre-approval is necessary before placing an offer on a home or even before you go house-hunting. It doesn't only give you an overview of what budget to plan for. Most sellers won't accept offers nowadays without a pre-approval letter. Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, such as finance a car purchase.
#2 Not Getting a Home Inspection
A home inspection is an essential part of the home-buying process. It can uncover hidden problems or defects that may not be apparent during a walkthrough. Skipping a home inspection to save money or speed up the buying process can cost you much more in the long run. A professional inspector can identify issues with the property's structure, plumbing, electrical, and HVAC systems that could lead to costly repairs or replacements.
#3 A Fixer-Upper Is Not Always a Good Idea
Yes, a fixer-upper sounds like a good idea until you actually have to start fixing it. If you are on a strict budget, look for homes the potential of which has yet to be realized. The upgrades you make will increase the value of your home and thus give you a bigger budget for your next purchase. However, be careful not to overestimate the type and amount of work you can do by yourself. Also, consult your real estate agent to learn what upgrade will add the most value to your home.
#4 Overbidding for Fear of Losing Out
Jumping in too fast or waiting too long to put in an offer are both risky in terms of cost and what kind of property you might end up with. To make sure you are not overbidding or repeatedly writing offers with no success, hire an experienced real estate agent. An experienced agent knows how much above or below the asking price properties in an area are sold and can help you devise an effective offer strategy.
#5 Not Shopping Around Enough
Many buyers think they're best off taking a mortgage with the lender they currently bank at. But this may not be the case. You can use a mortgage broker to learn about the different options you have at your disposal. Always make sure to have a breakdown of the total costs of each mortgage option on the table, including penalties for breaking the mortgage early.
