Buying a home can be exciting, but it can also be stressful. After all, you’re committing to stay in that home for the foreseeable future. Now more than ever, it seems like everyone is looking to buy a house instead of renting.
Between rising prices and an expanding inventory, there are more homes available than ever before. However, this high demand has created some unrealistic buying expectations from both buyers and sellers alike. If you’re thinking about purchasing a home, keep these common mistakes in mind so you don’t end up with buyer’s remorse later on down the road.
Don’t Buy a House Because It’s on Sale
When the offer is on the table, this should be your only focus. There are a lot of factors that can influence the price of a home at any given moment, especially in a hot market like California.
Buying a house because it’s on sale is neither a smart financial strategy nor prudent real estate practice. If you’re looking to buy a home, do your research and make sure you’re buying the right one. While you may be able to save some money by purchasing at a lower price, you may end up having to pay more in the long run.
If the surrounding market and demand surge in the future, the price of your new house could spike and put you on a more expensive mortgage. When the time comes to sell, it may also be harder to sell for a higher price.
Always Get a Mortgage Insurance Premium (MIP) Coverage
Mortgage insurance is a type of coverage that protects lenders in the event you can’t make your mortgage payments. Homebuyers are required to have mortgage insurance to receive a mortgage loan from a lender.
If you don’t have mortgage insurance, you will be responsible for paying the difference if the lender forecloses on your mortgage. It’s best to have mortgage insurance if you’re buying a house that’s more expensive than what you can afford, because you may end up paying more in the long run.
If you don’t have enough money saved to make large payments if you can’t make your mortgage. It’s also good to have MIP coverage if you’re planning on staying in an existing house a long time, like if you’re planning on renting out a room or two regularly. This way, you won’t have to pay the full amount if your lender forecloses on the house.
Don’t Pay More for a Home Than You Need To
Buying a home is a big investment, no matter how you slice it. When you’re ready to purchase a new home, make sure you’re not overpaying. While it’s good to look at the big picture and consider the long-term benefits of owning a home, don’t let your desire for a new house cloud your judgment.
If you can’t afford the home, don’t buy it. If you can afford the home without going into heavy debt, but you just want it because it’s a new house, don’t buy it. There are many homes out there that are just fine, don’t need to be replaced, and are perfectly affordable. You don’t need to buy a new house if you don’t need to.
Negotiate Without Set Terms
When it comes to negotiating, you don’t have to be afraid of throwing out an offer. While it’s best to have an idea of how much you can afford before you start shopping for homes, you can adjust your offer as you go along.
Also read: How to Negotiate On Selling Your House
If you have insight into the home’s market value, you can adjust your offer accordingly. Don’t follow the advice that you should never walk into a home you’ve offered less than what you think it’s worth. If you walk into a home you believe is worth $500,000 and offer $450,000, you’re walking into a deal that’s worth $50,000 less than you think. If you walk out of that deal with the home, you’ve just negotiated yourself out of $50,000.
Don’t Purchase a Fixer-Upper Until completion
When it comes to purchasing a home, don’t spend more than 20% of the total amount. This is an important rule to follow when buying a fixer-upper. While it may seem like a great deal, you should only spend money on the necessities like appliances, paint, and flooring.
This rule also applies to homes that have minor issues, such as older carpet that needs to be replaced and a few cracked tiles in just one room. In this case, you can comfortably spend 20% of the total amount without going over budget. Once you’ve spent 20% of the total amount, you should walk away. If you do go over budget and the seller reduces the price, you can consider walking away. This is a better option than continuing to overspend on the house.
Before making an offer, make sure it’s the right one
Before you make an offer on a house, make sure your finances are in order. This includes paying all of your bills, including credit cards, and saving enough money to comfortably make large payments while they’re still current.
When all of your ducks are in a row, you’re ready to make an offer. Once you’ve taken care of the most important items on your plate, you can start looking at homes for sale. The best way to find the perfect home is to simply drive around and take a look at what’s on the market. You can also look online at various real estate sites to see what’s available.