3 Common Home Buying Mistakes You Probably Haven’t Thought Of

June 13, 2017

When the real estate market is hot like it is right now, I can’t help but compare it to “whack-a-mole” — as soon as a listing goes up (or in some places, even before), it seems like it’s sold. I can’t help but think of buyers who often have to make a buying decision within hours of touring a new listing or risk missing their chance to “whack” and score their dream home.

When preparing to shop for a new home, most people do a great job following the general financial guidance such as:

  • Reviewing their credit scores,
  • Paying off high interest credit card debt;
  • Saving 20% for a down payment; and
  • Coming up with a budget to spend only 25%- 35% of their monthly take home pay on housing (this includes mortgage, interest, taxes, HOA fees AND insurance).

But when the market hits “whack-a-mole” status, I’ve found that few people give much thought beyond the basics. Digging into my own, “don’t ask me how I know,” file, here are three more considerations that buyers should keep in mind as they shop, no matter how hot the market is:

  1. Think about selling before you buy. Unless you are 100% certain that this is your “forever home,” consider your future buyers before making an offer. One of the biggest mistakes I made when I bought my first home was that I failed to consider how “sellable” my home would be if I wanted to move in the future. Several years later when I did move, I had a hard time selling because I owned in a struggling school district, which eliminated parents as potential buyers, as well as others who knew that a school district could make or break your ability to re-sell. Before you make an offer, do some quick research on the neighborhood and school district so that when you decide to move, you’ll be able to cast the widest net and capture as many potential buyers as possible.
  2. Shop around for everything. If my #1 mistake was not considering a future move, a close second was not shopping for all of the products and services I would need in the home-buying process. My Realtor was not bad, but I relied on her for everything, including finding a mortgage. When I reviewed my mortgage options after the fact, I realized that I could have gotten a much lower interest rate. I also realized that I paid too much for my appraiser, home inspector and even my homeowner’s insurance and Realtor’s commissions. (I still #FeelLikeASucker) Do not make my mistake – no matter how awesome your Realtor is, ask about her commissions. Shop for mortgage rates and compare your options.
  3. Buffer your budget. No matter how many websites you read about homeownership, some expenses are going to catch you off guard. For instance, I grossly underestimated utilities. I created my budget using the average my Realtor gave me, not realizing that it was an average or really what that meant. So when I moved in record cold temperatures in January, my gas bill was much higher than average. My moving expenses were also slightly higher than I expected, and I failed to factor in the fact that I was paying the final utility bills for my old apartment, while also paying utilities for my new home. To avoid becoming house poor in your first month, make sure you add an extra 10%-20% to your first couple months’ planned spending to account for the unexpected.

Following the guidance above may take some extra time, but trust me, it will pay off in spades and your dream of home ownership won’t turn into a cautionary tale.