Buying a house is not easy. There's many big decisions that will affect your whole life going forward. From how much you'll be able to save for retirement, how far you commute to work, where your kids go to school, to if ordering takeout is financially responsible. Unfortunately most people will only realize these decisions need to be made at the moment they need to make them or, worse, don't realize they were making them until after the home is bought. Here's a list of the 5 most costly mistakes home buyers make.
1.Making emotional Decisions - Love can make you do strange things. Make you do things you shouldn’t. Agree to things you'll regret. You'll hear people say, "the first time I saw my house I fell in love." If you don't have a plan to follow when you buy a house love can hurt. It can result in going over your budget, thinking a two hour commute isn't that bad, or living next to a highway is an ok idea. Everyone gets used to the noise right? Just because you love the house doesn’t mean it makes sense. Try to have as many of these variables worked out before you even start looking for a house. Have a rock solid budget you wont go above, decide what an acceptable commute is, and what kind of neighborhood you want to live in. Try to have as many deal breakers in place before you even start looking so once your in love you can refer back to your more pragmatic self to see if you're still on track.
2. Not considering expenses - Your mortgage is a big piece of your financial puzzle but its not the only one. There's taxes, heating, cooling, internet, maintenance, property and emergency repairs. Then there's personal expenses like cars, food, travel, retirement, college savings, and more. Know what you can afford and stick to it.
3. Falling for shiny new objects - Nothing's more of a red flag than walking into a house and seeing the kitchen's just been redone with shiny new stainless steel appliances and new counter tops. Its all incredibly cheap but its shiny. Maybe the tags are still on the appliances as an unsubtle reminder just how new they are. Basically the seller is hoping you're dumb enough to fall for this. To look past the fact that the rest of the house is in various states of disrepair. That the roof may be caving in and there's termites but gosh darn it the fridge is sparkling.
Of course the sellers have increased the price so now you have to pay for this cheap makeover.
You're going to have to replace all this stuff in a few years because it will all break.
what are you trying to distract me from.
4. Not getting a home inspection - If there's multiple bids on a house some buyer's will forgo the home inspection to sweeten their offer to the seller. Big, big, big, mistake. This move is for the rich and the crazy. God only knows what repairs need to be made and how much they'll cost. Does the house need a new furnace or water heater. Is the foundation cracked? Is there wood rot and the porch is about to collapse? There's an endless list of things that could go wrong and nothing in a house is cheap to fix. If I had to pick the worst move a buyer could make it'd be this one.
5. Not shopping around for a mortgage - A couple of tenths of a percent added on to a 30 year mortgage may not seem like a big deal but it adds up. The difference between 3.0% interest rate and 3.3% on a 30 year $200,000 mortgage will add almost $12,000. Then there's fees that the bank may add on to that. Call at least 5 lenders and mortgage brokers to see who can get you the best rate and ask to see the fees so you know what the total loan will cost. Its also good to check out an amortization calculator so you can see how much the loan will cost in total over its life span. With a 3.0% interest rate, which is historically low, you're going to have to pay your lender back $300k before you're done with that $200k loan.