By Lorenzo Billie Did you know that existing home sales in the United States came in at 5.95 million in 2022? According to Statista, the number is expected to increase to 6.07 million this year.
Homeownership is a dream for many people in the U.S. In fact, it’s one vital part of achieving the American Dream. But when considering the financial commitment needed to buy and maintain a home, you’ll want to avoid making errors that can turn your dream into a nightmare.
Whether you’re interested in buying your first home or wish to sell your home and move elsewhere, keep reading to learn about three mistakes to avoid when buying a residence.
- Failing to Get Pre-Approved for a Mortgage Before House-Shopping
One of the biggest mistakes first-time homebuyers make is not getting pre-approved for a mortgage before looking for a home. Even before you hire a real estate agent and line up a bunch of homes to look at, you should get pre-approved for the money you’ll need for a home.
When you go through the process, you’ll know if you’ve been pre-approved and how much you’ve been pre-approved for. If the bank is okay with lending you only $600,000, you won’t want to have your realtor show you homes worth $900,000.
An even worse scenario will be looking at homes, finding one you like, and later finding out you don’t qualify for a mortgage. You can avoid many problems and disappointments by getting pre-approved before looking at homes for sale.
- Using All Your Savings on the Down Payment
Another mistake you must avoid like the plague is depleting your savings for the down payment on your home. Yes, a larger down payment means you’ll need to borrow less money and get a better interest rate. But you shouldn’t leave yourself high and dry with no savings.
Remember that the price of the home is just one of the expenses you’ll incur when buying a place. You must also consider closing costs and expenses related to maintaining and repairing your new home. You could incur more stress than necessary without saving sufficient funds. It’s a good idea to have an emergency fund with at least half a year’s worth of expenses so that you don’t have to worry in the event that something happens like a layoff or sickness.
- Paying Too Much for Your House
Yet another big mistake is paying too much. One of the first things you need to do is set a budget so that you know how much you’re willing to spend. If a home you want gets many bids and a bidding war ensues, you’ll need to know when to back away. It might be difficult, but getting involved in a bidding war might lead to you spending more than the home is worth.
One way to find a home at the right price is by asking your real estate agent for comparables. In other words, you’ll want to see homes in and around the area that are comparable in size, number of rooms, number of bathrooms, and other amenities to the homes you’re interested in.
If you’re looking for a home in an area like, say, South Florida, you’ll want to look at as many houses or condos in West Palm Beach, as an example, that fit your criteria. It’ll be easier to find something you want at a price you can afford.
It might not seem like a big deal to overpay by a few thousand dollars — but that’s a few thousand dollars that could be in your savings account earning interest.
These are some of the mistakes you’ll want to avoid when looking for a home. If you find a good realtor, you can avoid these errors and get the right home for you and your family.