A home purchase is likely one of the largest purchases you’ll make in your lifetime. It’s important to get this one right. Whether buying your first home or your tenth home in order to get the best financial outcomes, here are some of the top mistakes to avoid.
Taking on too much: You think you’ve found your dream home, but it’s outside your housing budget. You think you can stretch your budget to make it work by taking out a bigger mortgage. This decision can be disastrous. Taking on more debt than you can afford will leave you struggling to pay utilities and other bills and will leave no room to meet other financial goals. A good rule of thumb is to limit the cost of your house payment (including taxes, insurance and any HOA fees) to 25 percent of your take-home pay.
Skipping the preapproval: Getting preapproved provides a useful guideline as to what you can realistically afford and will help you with not taking on too much. It will also give you a financial advantage when negotiating for a home. Sellers prefer to work with buyers that they know can afford their home and having preapproval lets you make an immediate offer when you finally find THE ONE!
Skimping on the down payment: The more money you pay up front, the less interest you’ll pay over time. If you save at least 20 percent for a down payment, you can also avoid PMI, which is a fee to cover insurance that protects lenders when a buyer has little equity in the home. And don’t forget to include closing costs and moving expenses as you save up for your purchase.
Going it alone: An experienced agent helps you determine a reasonable price for any home you are considering. We can also negotiate the best price for the home. Plus, the seller pays the agent’s commission, so you get all the expertise at no cost to you. When you’re ready to start your home search, just give me a call!