Don't Make These 8 Homebuying Mistakes

Though homeownership has many benefits and can be a valuable long-term investment, there are still plenty of mistakes you can make along the way. Some can cost you money, while others can make the process more stressful than it needs to be.

Luckily, a little preparation goes a long way. To help you know what to watch for, we asked Mario Gonzalez, Mortgage Loan Originator here at Amplify, to share some of the most common homebuying mistakes he sees and how buyers can avoid them. 

8 Homebuying Mistakes to Avoid

Whether this is your first home or your fifth, here are eight things to steer clear of when buying a house.

1. Letting emotions drive your homebuying decisions.

Buying a home is exciting, and it’s easy to get attached once you find a property that checks most of your boxes. But letting that excitement take over can lead to decisions you wouldn’t otherwise make.

You might feel tempted to stretch your budget, overlook a costly repair, or make concessions simply because you’re worried someone else will buy the house first.

“Once buyers fall in love with a house, it can be difficult to look at the numbers objectively,” says Gonzalez. “Try to decide ahead of time what you’re comfortable spending and where you’d be willing to compromise if it came down to it. That gives you something to come back to when emotions start running high.”

2. Making major financial changes before closing. 

Getting an accepted offer doesn’t mean that the financial part of the mortgage process is over. Your lender will likely continue reviewing your finances before closing, so this generally isn’t the time to make major changes without discussing them first. 

Things you’ll want to avoid before closing include:

• Taking out a loan for something like a car
• Opening a new credit card
• Financing furniture
• Changing jobs

All of these could affect information used to evaluate your mortgage application. Even seemingly routine financial moves can occasionally create additional documentation requirements. If something needs to change before closing, contact your mortgage lender first. They can explain whether it could affect your loan and what documentation may be required.

3. Buying based on what you qualify for rather than what you can afford.

A lender may approve you to borrow a certain amount, but that doesn’t necessarily mean spending the maximum is right for your household. 

After all, your mortgage lender looks at factors such as your income, debts, credit, and loan terms when determining how much you may be able to borrow. Your personal budget includes much more.

Think about routine expenses like basic necessities, childcare, travel, hobbies, retirement savings, and other financial goals to get an idea of how much house you can realistically afford. You’ll also want some breathing room for costs that can change over time.

“The number you qualify for should be treated as a ceiling, not a spending target,” Gonzalez explains. “I always encourage buyers to look at the monthly payment and ask whether it still leaves enough room for everything else that matters to them.” 

Before setting your homebuying target, work backward from a monthly housing expense that feels manageable. This can help you avoid becoming house-poor after closing.

4. Emptying your savings.

Putting down a sizable down payment is a move that can help you pay off your home faster and cut down on your interest payments— but it’s not a good idea to completely deplete your savings to do so.

Accidents can happen at any time, and it’s important that you still have money stashed away to fall back on in case of an emergency. Make sure you don’t dig all the way into your reserves. You still want some funds to cover something like unexpected medical bills, car repairs, or anything else that may pop up when you least expect it.

5. Choosing a mortgage based on interest rate alone.

Not all loans are created equal. Before you start applying for loans, look at which ones may be best for you. Explore all of your options, including conventional loans and government-backed products like FHA loans, VA loans, and USDA loans.

It’s also important to remember that interest rates matter, but they’re only one part of the cost of a mortgage. When comparing loan offers, look at the bigger picture. Depending on the loan, that could include lender fees, discount points, mortgage insurance, closing costs, and other expenses associated with borrowing.

“Two mortgage offers can advertise different rates and still be much closer in overall cost than they first appear,” Gonzalez says. “Ask your lender to walk you through the fees, points, and estimated cash needed at closing so you can make an apples-to-apples comparison.”

6. Underestimating upfront homebuying costs.

The purchase price of the house is by far the largest expense in the homebuying process, but it’s not the only one.

Many folks get so caught up in the purchase price and down payment that they forget to consider the other costs, including ones that need to be paid upfront. Think about things like:

• Closing costs
• Movers and moving supplies
• Minor home improvements and renovations to your new home
• Fees for moving utilities or starting new accounts

While these are certainly less than the price of a house, they can still add up. Make sure you factor these into your budget.

7. Not being prepared for homeownership responsibilities.

Similarly, your mortgage payment will be only part of the financial responsibility that comes with owning a home. If you’ve never owned a home before, be prepared for added expenses like property taxes, homeowners insurance, and HOA fees.

Home maintenance is also another consideration. Common costs include lawn care, landscaping, pool upkeep costs, and pest control. On top of that, you should be ready to foot the bill for anything that goes wrong in the house. If your A/C or a major appliance goes out, you’re responsible for getting it repaired or replaced.

Gonzales says that you want to think beyond simply whether you can make the mortgage payment this month. “A sustainable homebuying budget leaves room to maintain the property and handle repairs without every unexpected expense becoming an emergency,” he says.

8. Ignoring the home inspection or major property issues.

In a tight housing market, buyers may feel pressure to move quickly or make their offer more appealing. But overlooking the condition of the property can turn into an expensive mistake. 

A professional home inspection can identify potential problems with major systems and parts of the home, including the roof, foundation, plumbing, electrical system, HVAC equipment, and more. 

If an inspection uncovers an issue, take the time to understand its severity and potential cost. Depending on your contract and circumstances, you may be able to request repairs, renegotiate, or reconsider whether the home is still right for you.

Know the Homebuying Mistakes to Avoid

By knowing what to avoid, you’re already one step ahead in the homebuying process and on your way to making smart money moves. Just remember to take things slow, do your research, and get your finances in order before diving into home shopping.

This article was originally published on May 19, 2021.