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You’ve spent hours scouring online real estate websites trying to find the perfect place. All your friends have long ago committed to homeownership, and you think it’s time to do the same.
The pressure to buy a home is real. So, make sure you’re buying when the time is right for you. Purchase with confidence when you sidestep these five common home-buying mistakes:
Rushing into a purchase
You’ve got plenty of reasons to believe now—and only now—is the right time to buy a home. Hot markets, hot interest rates—even hot pressure from friends and family can convince you that you’re missing out on the opportunity of a lifetime if you don’t act today! But the truth is, rushing into a purchase before you’re ready could cost you big bucks in the long run. Here are a few good reasons to hold off:
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- If you’re new to a city, give yourself several months to a year to settle in to determine the area of town you like the most.
- If you’re unsure how long you’ll be the same city, hold off purchasing a home until you know you’ll be there long enough to put down some roots.
- If you’re newly married, give yourself time to adjust to life as a couple.
The timetable to purchase your first place depends on one thing: your readiness. So don’t let well-meaning outside influences, favorable market conditions or low interest rates make the decision for you.
Not saving enough before you buy
Buying a home isn’t a sprint. It’s a marathon that requires endurance, perseverance and deliberate financial planning. Waiting until you’re financially ready to buy a home will set you and your family up to win for decades to come.
So how do you know you’re ready?
Ideally, the 100%-down plan is the way to go. But most of us don’t have the patience to postpone a home purchase until we can pay cash for it. So if you’re going to borrow money for a home, here are some guidelines:
- Pay off all your debt, and build up an emergency fund of three to six months of expenses.
- Limit your monthly mortgage payment to 25% or less of your monthly take-home pay.
- Have at least 10% for a down payment on a 15-year fixed mortgage. A 20% down payment is even better because it helps you avoid paying private mortgage insurance (PMI), which only increases the size of your monthly payment.
Saving that much money might seem impossible at first. But a six-month side hustle like working nights and weekends at your favorite retail chain or restaurant could be all it takes to give you the cash you need.
Buying too much house
Don’t make the mistake of buying a decked-out dream home when you can only afford a basic starter house. Begin your home search with realistic expectations about how much house you can get for your money, then focus on what’s important. For example, choose a neighborhood in a good school district if you think you’ll have a family in the future. But don’t overspend on a 3,000-square-foot home when all you need is 1,500 square feet.
Here are a few tips on how to keep a level head during your house hunt:
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- Write down your house-size needs versus wants.
- Discuss your expectations with your spouse.
- Ask for feedback from your real estate agent.
Not budgeting for closing costs, property taxes and insurance
Your mortgage payment is just the beginning of your expenses when you own a home. Fees will come at you fast, starting with closing costs at signing. Those will set you back between 2–5% of your home’s value, so make sure to include them in your home-buying budget. Other expenses to think about include:
- Property taxes
- Homeowner’s insurance
- HOA fees
Bottom line: Owning a home means you’ll need to budget for expenses beyond your mortgage payment, so be prepared.
Disregarding your real estate agent’s advice
While this might be your first home-buying experience, your agent has been around the block a few times. Literally. Here are a few ways your agent’s expertise goes well beyond their ability to find you a great home:
- They’ll explain offer terms.
- They’ll walk you through the home inspection process.
- They’ll help you understand closing requirements.
Your agent is on your side, so lean on them during the entire process. A good agent will help you make a confident, educated decision about your future.
Buy with the best agents
If you’re going to rely on the advice of your real estate agent, you’ll want someone you know you can trust on your side. If you’re looking for an agent like that, check out our Endorsed Local Providers (ELPs). Our real estate ELPs are the best of the best and close more than three times more transactions per year than the typical agent. You can trust your ELP to walk with you through your first-time home purchase with confidence. Find an outstanding agent in your area today!