Recent statistics reveal that in the United States, there are roughly 120 million housing units that are occupied, both by renters and owners. Of the U.S. homes sold in 2021, 92% used a real estate agent or broker.
While the market changes over time from a buyer’s market to a seller’s market, and back to a buyer’s market, there are still always people shopping for a home. The market determines your home shopping strategy, though.
As a part of your strategy, it is important that you consider common errors for home buyers. Knowing the typical mistakes that home buyers make will ensure you are making the best decision for you when looking at options for homes.
Here are the top eight errors to avoid.
1. Not Preparing Financially
Buying a new home is exciting, especially when you scope options for homes on the market. However, if you are not ready financially, it is not a good time to buy. Before buying a home, you need some cash saved in your bank account.
Consider the cost of closing, which usually requires payment upfront. This averages 2% to 5% of the amount of the loan you are taking. Also, your home will need maintenance and repairs.
Stash some cash in an emergency fund to help you when you need it.
2. Prepare Your Credit
Not only will you be comparing home prices, but you will also want to compare loan options too for the mortgage. Getting the best rate for a mortgage largely depends on your credit. A lender will review your credit score and your credit report.
The credit report will show your payment histories and your debt. This will show if you are eligible for a loan. Your credit score will determine your interest rate, though.
3. Not Getting Preapproval
Do not just get pre-qualified, get pre-approved. It will help you with the entire home-buying process.
A preapproval mortgage letter does two things. It lets home sellers know you mean business when making an offer to buy their home, but also, the paperwork process will go faster should they accept your offer.
4. Getting the Wrong Type of Mortgage
Do not let the different mortgage options confuse you. A fixed-rate mortgage lets you lock your interest rate.
Adjustable-rate mortgages, however, will change as the market changes. When the rates increase, so does your payment. Because they are volatile, and especially when you are on a budget, this may not be the best option for you and you should choose a mortgage with more consistency.
Not only that, but you will need to select the duration of your loan. According to Freddie Mac, 90% of homeowners choose a mortgage that is 30 years and has a fixed rate.
5. Selecting the Wrong Neighborhood
If you have yourself aligned financially, you can plan your home shopping strategy. This includes choosing the right neighborhood for you.
Who will live in your home? How many people? Shopping for homes for families will differ for a single person or retired parents with grandchildren.
Even if you do not have kids now, but you are planning a family for the future, this will affect what kind of neighborhood you are looking for.
Consider your lifestyle. Are you looking for someplace with easy access to grocery shopping or easy access to nightlife? Do you want excellent schools close by or a church where you can be active?
Make the community a priority besides just the house. A real estate agent can help you with this.
Although, you should do some research on potential neighborhoods yourself, too, before speaking with a real estate agent. We recommend you check these properties for sale in this neighborhood.
6. Not Setting a Monthly Budget
This is an especially dangerous scenario for home buyers shopping options for homes in a hot seller’s market. Bidding wars are common. You may be more consumed with a win than with if you can afford it.
A professional real estate agent will give you this advice, too. As part of your home shopping strategy, make sure you stay within what you can afford for your monthly mortgage payment.
7. Not Saving Enough For Your Down Payment
The more you can put down upfront on the home, the better off you will be. The smaller the mortgage loan you can take will help you in the long run.
While the more you put down, the larger you could qualify for a mortgage loan, you could just select a home where your payments are smaller and keep a more comfortable monthly budget.
8. Skimping on Insurance
While buying a home is exciting, it is also nerve-wracking. Insurance gives you peace of mind. There is title insurance and home insurance.
Title insurance is optional, but protects you, the homebuyer, from property title issues. This helps if there are liens or frauds on the property you are purchasing. It is a one-time premium.
Then there is home insurance, which lenders often require. If there is damage, destruction, theft, or injury to your property, your home insurance will cover it.
Errors for Home Buyers
We know how exciting buying a home can be, and we want you to be thrilled with your decision. Therefore, we want to educate you on a few common errors for home buyers to help you decide with confidence.
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