Home buying mistakes you must avoid

Buyer Mistakes

Avoiding mistakes as you move through the home buying process will make your transaction run smoother, cut down on stress and probably save you money in the long run. Unfortunately, too many buyers make these mistakes every day. Here are four mistakes that you want to avoid during the home buying process to make your transaction go as smoothly as possible:

Mistake #1: Buyers don't ask enough questions of their lender and miss out on the best deal. The solution? Do your homework by asking the right questions. For one: do I really need to pay mortgage insurance? The short answer is “no.” If you are buying with less than a 20% down payment (which most first-time homebuyers are) then you are going to be faced with a decision on whether to pay mortgage insurance. This insurance, which has nothing to do with life or homeowner’s insurance, covers your lender if you fail to pay your mortgage payments. The bad news is that you’re the one who will have to pay it--every month.

Mortgage insurance can be a modest monthly expense if you have a larger down payment but it can be a rather large burden if you have little or no down payment. The good news is you can usually avoid it, if you get the right type of mortgage--which is really two mortgages instead of just one. By adjusting the initial balances on both mortgages to fit underwriting guidelines, your loan officer can eliminate the need for mortgage insurance.

Mistake #2: Buyers don't make a decision quickly enough and someone else buys the house. Nearly all real estate agents have at least one story to share about the buyers who searched far and wide for just the right home but didn’t act quickly enough with their checkbook. Consider this scenario: you’ve found your perfect home, but you need to think the whole thing over for a day or two. Or perhaps you want dad, Uncle Joe or that buddy from work who’s also a part-time carpenter to give you their opinion. After all, buying a home is a big step, you reason, it doesn’t hurt to check things out thoroughly, does it?
Well, someone else was also searching far and wide for just the same home. They found it the day after you did, made an offer right away, and bought that perfect home right from under you, while you were waiting for Uncle Joe to find the time to wander over and give you his opinion.

And what might have happened if Uncle Joe had managed to take a peek at your long sought treasure? He might have choked when he heard the seller’s asking price. Uncle Joe, mind you, still wears leisure suits from the 1970’s and hasn’t checked home prices in over 25 years. Saying he is out of touch with today’s market might be a bit of an understatement. Dad and Uncle Joe might know more about house construction than you do, but if you’ve been doing any amount of house hunting, chances are you know a lot more about today’s home prices than they do.

The moral to this story is: Once you find the right home, don’t delay waiting for someone else to give you an opinion. Make an offer on the home with a contingency clause that you get the house inspected and it receives a passing grade from a professional home inspector. Realtors deal with this all of the time and it’s a normal part of the home buying process. You’ll avoid losing out on your dream house and a professional inspection will beat out Uncle Joe’s opinion every time.
Mistake #3: Buyers don't do enough to make their offer look good to a seller. What makes your offer look good? Getting pre-approved for a mortgage is one item all Realtors and sellers insist upon. Think about it. You don’t go shopping at Target or Sears, haul $100 worth of merchandise to the checkout counter and then ask the checkout clerk to give you a loan to buy the stuff. You know how you’re going to pay for it in advance.
The same should hold true for the biggest purchase of your life--your new home. If a seller receives both your offer and another offer simultaneously but the other offer includes a mortgage pre-approval letter while yours doesn’t, that seller probably won’t even consider your bid. He doesn’t want to remove his home from the market while you try to get financing. He wants assurance that you are able to complete the transaction without a hitch, and he doesn’t want financing to throw a monkey wrench into the works at the last minute.

An offer with a pre-approval letter from your loan officer reassures any seller and is a must in today’s marketplace. Yet many buyers wait until the last minute to get pre-approved and sometimes are deeply disappointed when they learn they can't qualify for the home they've picked out.
Mistake #4: Buyers don't think about resale before they buy. Three or four bedroom houses sell more quickly than those with only one or two bedrooms. A two or three-car garage adds more value than a one-car garage or no garage at all. Do your homework and understand what it is that most buyers want in a home. It will pay you back at re-sale time. You may have fallen in love with that one bedroom rambler with no basement that’s right next to the freeway. Fortunately, the freeway noise doesn’t bother you because it’s racket is drowned out by the roar of that 747 jumbo jet just 100 yards overhead gliding in for a landing at the airport.
Sometimes affordability requires compromise, but knowing what will help with re-sale can at least give you an educated estimate on what is worth compromising on and what isn’t. You might be able to add a third bedroom in an attic or a basement, but the chances are that the freeway will still be there when it comes time to sell. Just be sure that you’ve taken that into account. The average first-time buyer stays in a home for just four years. Planning ahead can provide a little extra equity when resale time arrives.

Name That Value

	Four Home Buying Mistakes You Must Avoid