Avoiding 7 Common Homebuyer Mistakes

7 Common Homebuyer Mistakes –

and How to Avoid Them

We all make mistakes. But making a mistake when you’re buying a home can cost you – big time. These are the seven mistakes that can cost you dearly when buying a home. Read on to educate yourself about these common mistakes homebuyers make. So you can avoid making them, too.

Mistake #1: Picking the wrong home

Know what you want – and what you need. And know the difference. Too often, we confuse what we need with what we want. We need cable TV. We need new clothes. We need the home of our dreams.

In reality, there is often a big difference between the home that satisfies our needs and the home we really want. If you work with an experienced real estate agent you could get both. But it’s important to know the difference.

Take some time to write down the features that you absolutely need in your next home. Examples could be three bedrooms so that everyone can have their own. Two bathrooms for a growing family of four. A home in an area with excellent schools. Affordable monthly payments. A home near the office for a shorter commute.

Then list the features that you want. Examples could be a large kitchen to fit all the cooks at Thanksgiving. Travertine floors. A big backyard for the kids to play. A downstairs master bedroom for some peace and quiet. Berber carpet. A swimming pool.

When looking for homes, look first for the features you need. Then look for homes that also have the features you want.

Mistake #2: Not getting a mortgage pre-approval

If you’re going to take out a mortgage to buy your home, you should get a pre-approval before you start house hunting. That way, you’ll get a better mortgage – and a better deal on your house. (It’s also a required part of the home purchase contract in Arizona.)

A pre-approval is a statement from a lender of the amount of money you qualify to borrow. Pre-approvals are typically good for 90 days and are contingent upon your financial situation staying the same.

One benefit of getting pre-approved is that it will allow you to confidently negotiate better loan terms with different lenders, because you can say “I’ve been pre-approved with Bank Y, and they’re offering X, but I’d like to do business with you if you can give me a better deal.”

Another benefit is that you’ll be taken more seriously by sellers. When sellers have a choice between offers, they’ll more likely accept an offer from a buyer with a pre-approval because it gives them confidence that you can get a mortgage loan to purchase the house.

Yet another benefit is that you’ll know how much house you can afford. With a pre-approval, you can figure out how much you’d pay in monthly mortgage payments on any given house price. Doesn’t it make sense to know how much house you can afford before you go house hunting? That way, you save time by looking only at homes that are within your budget.

So, before you start house hunting, get a written pre-approval from a mortgage lender. You’ll get a better mortgage and a better deal on a house, and you’ll avoid wasting time hunting in the wrong price bracket.

Mistake #3: Offering too much – or too little

You want to offer the right price for the home you’re buying. Ideally, you’ll be able to pick the price that’s just right. If you offer too much, you’ll end up paying more money for the house than you should have. If you offer too little, you may be rejected or outbid by another buyer, and lose the chance to buy your dream home.

75% or more of the homes on the market are overpriced – some by as much as 20% over true market value. Your real estate agent should know the market values for homes in the areas you’re interested in. He’ll be able to tell you if a home is overpriced and by how much. He’ll be able to help you make a reasonable offer that a seller will accept – and get you a great deal at the same time.

If you walk into a negotiation knowing the fair market value of the home (and by home much the seller’s asking price differs from that fair value) you’ll have the upper hand – and may be able to make an offer for thousands below fair value.

Mistake #4: Not getting the home inspected

Imagine. . .

You’re finally able to buy your dream home – the one that made you sigh every time you drove by it. You’ve moved in all of the stuff. The kids. The pets. You’re finally starting to get settled, and you realize that behind the freshly painted stucco exterior your home is rotting. The winter months roll around, you turn on the heater, and discover that it’s leaking carbon monoxide

“It’s only been six months since I bought this home,” you think to yourself. “The seller said there was nothing wrong with it.”

But you’re out of luck. Your dream home has become the money pit.

Don’t let this be you. Hire a professional home inspector during the 10-day inspection period (required as part of the Arizona home purchase contract).

A good home inspection is an objective, top-to-bottom examination of a home and everything that comes with it. The standard inspection report includes a review of the home’s heating and air conditioning systems, plumbing and wiring, roof, attic, walls, ceilings, floors, windows, doors, foundation, and basement.

Your real estate agent should be able to recommend a professional home inspector. If you can meet the inspector and ask him to describe the problems he found and how serious they may or may not be.

(For more information about getting a home inspected, check out the free report What Buyers Need to Know: Get that Home Inspected Or You’ll Be Sorry, available at MyPhoenixMLS.com.)

Mistake #5: Failing to mind the contract

There will probably be some (hopefully small) problems that will have to be fixed before you finalize the purchase of your home. When you sign a purchase agreement with the seller, make sure that it’s conditional upon a satisfactory home inspection and that it provides funds in escrow for necessary repairs to be made.

It’s important to hire a home inspector to look for hidden problems that need to be fixed before you close on the home (not hiring a professional home inspector is Mistake #4).

Once the home inspection is completed, go over the list of things to be fixed with the seller. When the seller says the issues are fixed, walk through the house to make sure for yourself, crossing the items off your list as you go. You’ll have very little recourse if you notice any problems after you’ve already closed.

Your real estate agent will be able to help you make sure that your interests are properly protected in the purchase agreement that you sign with the seller. To make sure that your i’s are dotted and your t’s are crossed, keep the following points in mind:

• Go over the contract – line by line – with your real estate agent to make sure you understand all of the terms you’re agreeing to
• Make sure your lender orders the appraisal after you and the seller work out any repair issues
• Be sure to give your lender everything they ask for — in a timely manner
• Make sure your lender delivers all loan documents to the title company three days before closing (as required by the Arizona home purchase contract). Make sure you sign those documents.

Mistake #6: Forgetting to budget for the extra costs

Too many homebuyers forget to budget for all of the extra costs that they’re responsible for. Some are due at closing. Others you’ll have to pay every month. Not preparing yourself for these costs could derail your home purchase.

To prepare yourself, learn the 8 most common extra costs that can pop up at the closing table. They are:

• Loan origination and processing fees
• Appraisal fee
• Private mortgage insurance (PMI)
• Property taxes
• Homeowners (hazard) insurance
• Utility hook-ups
• Moving costs
• Homeowners association or maintenance fees

Plan for them. Put them into your budget. And then rest easy knowing that you’ve got everything covered.

(For more information on the 8 most common extra costs that you’ll face as a homebuyer, check out the free report 8 Extra Costs that Could Derail You at Closing, available at MyPhoenixMLS.com)

Mistake #7: Rushing the closing

Closing is the final task in the home buying process. Surely you’ll be excited to get to your new home, but rushing through the closing could cost you tens of thousands of dollars, heartache and even your home.

First, make sure your mortgage lender sends you all of the loan documents three days prior to the scheduled closing so that you can look them over in a calm, comfortable environment. Make sure that all terms reflect what you had previously agreed upon with the lender. Pay particular attention to the interest rate, term, and monthly payment.

At closing, take your time reading through the documents to make sure that nothing has been added or subtracted since you last reviewed them. If you have questions, ask. And, by all means, read everything before you sign it. Not having read the documents – or not having understood them – is not a justifiable defense for signing a bad loan. Your real estate agent will be able to help you understand the complicated terms that you may find in your closing documents.

The real estate experts at MyPhoenixMLS.com attend every signing. We want to make sure that you avoid these 7 mistakes and make an informed decision. It is, after all, one of the biggest decisions of your life. For more information, call us today at 602-318-1114 or 1-866-249-1678 or e-mail info@myphoenixmls.com.