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10 Mistakes to Avoid When Buying a New Home, Part I

Buying new housing is a long process with many factors to be considered. You may have a checklist of what to do, but it is equally important to be armed with a list of what not to do. Below, we provide 10 mistakes to be avoided at all costs.

1. Not having a long-term budget. A budget is an essential step before even beginning to look, because you can’t buy a home if you can’t afford it. Your mortgage, principal, interest, taxes, and insurance should take up no more than one-third of your monthly household income. There are many budget apps and mortgage calculators available online to help you determine these crucial elements. One of the latter can be found here.

2. Failing to research the neighborhood. Most people think a great deal about the home they want and the amenities they desire—a lawn, say, or proximity to great public transportation. But it’s equally important to research the neighborhood itself. Are your neighbors involved and friendly, with lots of community events, or is the social environment distant? What is the crime rate? How about schools? Are they close? How do they stack up with the other schools in the state? Whether you currently have children or plan to have them, these are extremely important questions and should not be overlooked.

You also need to take into account any lifestyle changes that might occur over the time you own the house. For example, you might not plan to have children or might be single. But in a decade or so, the picture could look very different. Also, you may be years from retirement when you buy, so stairs are not a problem. Might they become a problem 10 years down the road?

3. Not checking your credit report and score. Like the first two, this needs to be done before you even think about buying a house. It’s a good idea to get a copy of your credit report a year before you will be buying, so there is time to review it and correct any mistakes before a potential lender pulls your report. The better your credit rating, the better your chances of being preapproved at a low interest rate. Here is a good place to check your credit.

4. Not establishing preapproval with the lender. Real estate professionals recommend that prospective buyers get a preapproval from their lender prior to looking at houses. The lender will want to know your income (think pay stubs and W-2’s), and will want to look at your bank statements and any brokerage statements. It lets you know how much house you can afford, and saves the heartache of falling in love with a dream house only to find out you can never afford it. In addition, in a competitive market, it could make you win a bidding war against another interested party who does not have preapproval.

5. Forgetting about all the costs of owning a home. Yes, you calculated the mortgage, the taxes, and the interest. But how about all the other costs that homeowners must pay? The closing on a house itself includes multiple fees (appraisal, escrow, homeowner’s insurance, and moving costs). You may have had the utilities paid as a renter; as an owner, you have to factor them in each month.

Interested in buying a new home? Contact us.