The Top 10 Mistakes Made in Buying a House

Not Being Pre-Approved for a Mortgage

Mistake #1 Not Being Pre-Approved for a Mortgage

Being pre-approved (NOT pre-qualified) for a mortgage sets the financial benchmark for a home purchase. A pre-qualification from a bank or other lender is that lender’s best guess, based on the financial information the applicant provides, as to how large a mortgage it would be willing to give you. A pre-approval, complete with an approval certificate, means the lender has done much of the paperwork for the mortgage and is just waiting for the applicant to find the property. One important caveat: Just because a lender is willing to issue a large mortgage doesn’t mean the applicant can comfortably assume that amount of debt.

Mistake #2 Not Shopping Around for the Best Lender

Shopping around, getting referrals from real estate agents or brokers, and asking friends or relatives about competent lenders can give prospective home buyers the most options. Additionally, use caution when selecting a lender solely based on their interest rate, as other important considerations should be made regarding their loan fees, closing costs, discount and origination points, etc.

Mistake #3 Waiting to Buy Home Owner’s Insurance

A new home owner’s policy can take up to 45 days to take effect. However, the policy is due at the time of closing, so waiting to get the insurance can delay the closing. One of the best ways to provide coverage prior to closing is to work with an established agent and get the paperwork in order, so that the address of the property is the only other piece of information needed before closing. Using the pre-approved dollar amount, to be adjusted as needed, is a good benchmark for determining how much insurance is needed. This is a good time to shop around for the best rate and coverage options.

Mistake #4 Not Having a Broker or Agent

With the advent of the internet more people are trying to sell their homes as they would a used car. However, because this is a legal transaction and the laws change on a regular basis, it is better to have an experienced broker or agent who knows what can and cannot be done. Brokerage fees are typically paid by the seller of the home in any event.

Mistake #5 Not Allowing for Delays in the Transaction

Buying a home is an extensive process with various complex transactions. Most agents or mortgage lenders will ask for six to eight weeks for processing with another two weeks added in for possible delays.

Mistake #6 Buying Too Much or Too Little of a House

Make a list of exactly what you require in a home. This will help ensure that the final choice is a good one. If you plan on having a family, look at how many bedrooms and bathrooms you will want. Choosing a house that is too large, if you previously lived in a smaller dwelling, could compel you to buy more furniture and other items to fill up the space, even if you can’t afford them.

Mistake #7 Buying in the Wrong Location

Location, location, location is the mantra of the real estate industry. Is the house you are looking at in a neighborhood you’d feel comfortable in and enjoy? Does it have the schools, shopping/retail environment, and public transportation necessary for you? Walking around the neighborhood at various times of the day can help you gauge whether or not you like and feel safe in the area.

Mistake #8 Buying at the Wrong Price

Is the property price comparable to others in the neighborhood? If not, why? Be sure you compare properties by asking the agent what comparable homes have sold in the neighborhood over the last six months and for what price.

Mistake #9 Not Getting the Necessary Inspections

Depending on the type of loan, various inspections are required. In general, they include a home inspection, termite inspection, sewer inspection (if not hooked up to a city line), heating/cooling system inspection, and inspections of the current appliances that fall under seller warranties.