6 Common Homebuyer Mistakes to Avoid

Purchasing a home can be one of life’s most exciting adventures — but it’s also an incredibly stressful time, especially if you’re a first-time homebuyer. It’s easy to make these rookie mistakes when going through this process, but thankfully we’re here to help with this handy roadmap so you can avoid these common mistakes.

Shopping Before Speaking to a Lender

Before attending any open houses, buying furniture, or salivating over online photos, it’s crucial to know just how much home you’ll be able to afford. Your house hunt should begin with a reality check and a detailed look at your finances. 

You’ll want to go over your credit report with a fine-toothed comb and make sure that any errors are removed. An accurate report that shows good payment history will help you get the mortgage you need. Hopefully, you’ve got a healthy nest egg put aside already, but it’s never too late to start saving wisely.

Looking at homes only after you have a pre-approval in hand can be the difference between living in the home of your dreams or the heartbreak of losing out to a more prepared buyer.

Not Doing Your Due Diligence

Selecting a mortgage lender is about more than just comparing interest rates. From traditional banks and online lenders to your local credit union, there is a multitude of options available for motivated buyers. There are also many government programs, especially for first-time homebuyers, that offer down payment assistance and favorable rates.  

You might also have heard the terms “pre-approval” and “pre-qualified” — what’s the difference, and what does this mean for your homebuying hopes? The pre-qualification process is quick and easy and gives you an estimate of your purchasing power. But lenders don’t take a super in-depth dive into your financial reports. 

These days a seasoned listing agent may not even look at an offer that’s accompanied by a pre-qualification, they’ll want to see a proper pre-approval from a reputable lender, and not an online-only shop.  

Getting pre-approved is the proper next step, and it’s a more involved undertaking, requiring an official mortgage application and a thorough review of your financial situation. Once you’re pre-approved for a mortgage loan, you’ll know exactly how much you’ll be able to borrow, and your offers will be taken seriously.

Carefully comparing your offers from various lenders will help you choose a manageable mortgage for a home you can afford. 

Taking On Too Much Debt

While it’s tempting to buy the most expensive and gorgeous house on the block, be careful about tying yourself to too much house. A recent study shows plenty of people get buyer’s remorse because they feel “house poor.”

Owning a home is a great investment and a fabulous way to build generational wealth, but it also comes with its share of unforeseen expenses, as well as costs like property taxes and homeowner’s insurance. 

Getting in over your head with a huge mortgage can exacerbate stress and cause you unnecessary headaches. Your expert real estate team can offer advice and guidance on finding the absolutely perfect home for you and your family. 

Not Making a Big Enough Down Payment

This will be one of the biggest up-front costs you will face in the homebuying journey, but it’s not as scary as it sounds. In the old days, a 20% down payment was considered the standard, but times have changed and lenders are now more flexible.

However, if you skimp on your down payment, this can give you certain disadvantages in today’s competitive housing market. A larger payment makes you more attractive to both mortgage lenders and sellers. Many homes receive multiple offers and property owners are looking for the most attractive one with plenty of financial oomph.

Making a bigger down payment also decreases your loan amount, which usually means lower monthly payments. A sizable down payment also decreases your loan-to-value ratio, which may qualify you for lower interest rates and help you avoid having to purchase private mortgage insurance. This gets complicated, but a knowledgeable lender will simplify it immensely.

Not Getting an Inspection

You’ve fallen head over heels in love with the most adorable house and you can’t picture yourself living anywhere else. Congratulations!

However, if the seller of the property doesn’t agree to an inspection contingency, that’s a huge red flag. Since we’re in a highly rivalrous market right now, some buyers are making the decision to forgo a thorough home inspection, and this can be a big mistake.

You can still get your hands on your dream home even if a few issues are found during the inspection. Many houses have minor issues, from cranky plumbing to slight roof damage, that won’t derail the sale and actually might give you a bit of negotiating power. Even in an “as is” transaction, while you may not be able to get repairs or remedies for deficiencies found in the home, you’ll go into your purchaser with eyes wide open.

But buying a home with massive structural problems or faulty wiring can cost a fortune to fix or present actual safety concerns for your household. It’s not worth saving a few bucks in the short term when you could possibly be making a very costly misstep.

Not Being Realistic

There is a home out there that’s just right for you and your loved ones. But it probably won’t be the first one you tour, or even the twentieth one. And when you do find one that seems ideal, it’s possible another buyer may make a more appealing offer to the seller and walk away with the keys.

Buying a house is more than just finding a place to live, it’s a major investment and one of the momentous occasions of your life. It’s also a complicated process that could take more time than you might be expecting. 

And though it’s are, real estate transactions do fall through due to a variety of factors, such as discovering a cloudy title, deadly issues found during the inspection, or sudden changes in your or the seller’s finances. 

If you have questions, you’ll find some peace of mind by just doing a little research. One of the best ways to ensure you come out ahead in a homebuying deal is by working with an experienced real estate team with rich local knowledge, an extensive network of service providers, and concierge customer service. 
At Baird & Warner, we can not only save you money during this process, we’ll be with you every step of the way. For over a hundred years, we’ve been deeply committed to building more equitable communities and helping every Chicagoan get the fair access to housing that they deserve. If you’re ready to find your forever home, reach out to us today!

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