Buying a home is the single biggest (and most expensive) purchase that a person can make. Homes in today’s housing market are more expensive than ever. As a buyer, the last thing that you want to do is spend more money on a home than you can afford. Unfortunately, plenty of buyers make costly homebuyer mistakes that lead them to spending far beyond their budget.
Nobody wants to pay extra money if it it isn't necessary. Luckily, nearly all of these costly buyer mistakes are avoidable with some prior research and a knowledgeable team by your side. Here are 8 costly homebuyer mistakes that will help you keep more money in your pockets.
1. Overestimating Your Budget
There is a reason why it is recommended to get pre-approved for a loan before you begin house hunting. Getting pre-approved for a loan helps buyers have an idea of how much they can spend. However, that doesn’t always mean you should plan to spend that whole budget on the home alone. There are other costs to factor in such as utility costs, HOA fees, home maintenance and repair costs, property taxes, and more. If you’re not careful, these added fees can easily send you over budget.
2. Buying a Home “As Is”
A home listed “as is” should immediately send up a red flag. When a seller lists a home “as is” this means the seller will not offer warranty to defects in the home. In other words, what you see is what you get. This leads many buyers to getting stuck with unexpected repair costs that often outweigh any money saved on the home. If you choose to buy an “as is” home, make sure you get it professionally inspected before putting in an offer.
3. Buying a Fixer Upper
Do the home improvement shows have you feeling inspired to purchase a fixer-upper of your own? Unfortunately, many home buyers get in over their head when purchasing a fixer-upper. While there are a lot of repairs you can do yourself, there are others that must meet local building codes. This includes tasks such as wiring, plumbing, and roofing. This usually requires hiring subcontractors that add to the cost if the home is in need of lots repairs.
4. Getting the Wrong Loan
Different loan types have their financial benefits depending on your intended living situation. It’s easy to be lured in by the promise of low monthly mortgage payments that come with an adjustable-rate mortgage. After a year or so, that monthly mortgage payment can increase depending on whether the Fed raises interest rates. This may not be a huge deal if you are only planning to live in the home for a short amount of time. If you plan to live there long term, it may not be worth paying an increasing monthly payment. A fixed-rate mortgage may be a better choice. Research loan types to find which is best for your situation.
5. Failing to Negotiate Prices
Failing to negotiate prices is a common costly mistake. This is especially true for first-time homebuyers that are afraid of offending the seller and losing out on a home. More often than not it is worth the risk of negotiation if it means you can avoid paying more than you have to. In today's competitive housing market, most sellers list their home prepared to come down on their originally listed price. If you are working with an experienced buyers agent, they will be able to help you negotiate an appropriate bid and assist in negotiating with the seller.
6. Talking to Only One Lender
While it may be easy to go with the first lender you speak to, it’s best to do your research before committing. Don’t always assume that all mortgage lenders offer the same interest rates and loan terms. These rates and terms can vary between mortgage lenders. It is usually recommended that buyers speak to at least three different lenders, asking each about their rates, terms and fees. Buyers should use this information to compare and select the best lender for them. You can save thousands of dollars just by choosing a right lender.
7. Making a Small Down Payment
While putting down a small down payment may initially seem like a cost efficient way to buy a home, you’ll actually pay much more in the long run. Buyers who put less than 20% down on a home are required to pay for private mortgage insurance (PMI). In addition to paying for added insurance, you will also likely be paying a higher interest rate on your mortgage. While it might take a bit more time to save enough money to put 20% down, you will save thousands of dollars in mortgage costs. Most times a home is worth the wait for less financial strain.
8. Not Using a Low Commission Brokerage
Working with a buyer's agent from a reputable brokerage is a great decision for any buyer . While you may have to pay agent commission, it is usually worth it for the many services they provide. Working with a brokerage is already a step in the right direction, but what if we told you that you could get a full-service experience for a reduced commission price? That's where low commission brokerages come in.
Working with a low commission brokerage like SimpleShowing, buyers can cut their agent commission fee in half. This saves them an average of $5,000 without having to compromise traditional broker services like inspections, negotiations, or contract support. The money buyers save on agent commissions can be applied to closing costs. If there is an opportunity to save money on realtor commission fees, why not take it? Buying smart can save you big!
Avoid these costly homebuyer mistakes by getting connected to a SimpleShowing agent. Contact us at SimpleShowing today to connect with an agent in your area, or begin the house hunting process by searching homes and booking showings here.