There is nothing worse than regret and you never want to look uninformed, but sometimes our emotions, lack of experience, or poor planning can lead us into painful situations.
The fact is, today’s real estate market is rapidly changing and buying a home can be more complicated than it seems.
Over the past 30 years, we’ve built a team of top experts to help guide people like you in finding their next home in the greater Boise area. In other words, we’ve seen just about everything from contracts that are full of holes, difficult sellers, unethical mortgage lenders… you name it!
We believe everyone should love where they live and we work hard to make sure our clients don’t have any regrets after they leave the closing table. If you’re planning ahead for a future move, these are the top 13 mistakes to avoid when buying your next home.
Common Sense Mistakes
1. Shopping without knowing what you can afford
We’ve all drooled over houses we can’t actually afford, but there’s a difference between window shopping and legitimate house hunting.
If you didn’t know, it’s smart to spend less than one-third of your monthly income on housing. While this rule of thumb is helpful in understanding your ceiling, it doesn’t help you calculate things like down payments, interest rates, or all your other monthly expenses.
Now introducing: the Affordability Calculator!
Thanks to our friends at Movement Mortgage, you can easily drop in a couple numbers and get immediate estimates on your buying power. It’s free and actually kind of fun!
This helps take the mystery out of budgeting and allows you to see what’s actually possible.
Ready to receive a real pre-approval letter?
Contact our preferred lender, Todd Shreeve with Movement Mortgage, to get started.
2. Letting your emotions drive the bus
While searching for your next home, you will experience a variety of different emotions, including excitement of a home that may be what your dreams are made of. But at the end of the day, buying a home is a very large financial commitment and you want to make good decisions.
Maybe you’re a sucker for beautiful and new homes with current design trends (looking at you, Modern Mountain architecture). It’s great to know what you love and multiple inspiration boards you save pins to on Pinterest, but stretching yourself to make a larger house payment that is beyond your means will only cause stress and keep you from being able to relax and enjoy your home.
When it’s time to buy, keep it practical and don’t let your emotions take the wheel.
3. Buying without an agent
If it’s your first time buying a house, or your first time buying a home in a while, there’s probably a lot you don’t know about today’s market. You can attempt to go it alone, but finding the true value of a home is harder than ever with quickly changing factors like inflation, interest rates, demand, and home values.
In some ways, buying a house is a lot like whitewater rafting:
- River conditions are constantly changing
- Some obstacles aren’t obvious
- Staying safe is hard without an expert
It’s wise to trust a real estate professional who can guide you through any scenario that may arise, will negotiate on your behalf, and will work hard to help you achieve your real estate goals . When you buy a home, you’re putting a lot of money on the line and it’s worth making the small investment to work with a local real estate expert.
4. Keeping Sky-High Expectations
This can be hard to accept, but it’s unlikely you’ll find a home that meets everything on your wishlist.
When you’re looking for that next great place to call home, we recommend compiling a priority list. Fenced-in yard, minimum number of bedrooms, garage space, updated kitchen… you name it.
Once everything is written out in front of you, try identifying three non-negotiables. Ask yourself, “Would I still consider buying this house if (x) wasn’t here?”
By setting a top 3 list, it gets much easier to find great homes without letting the less-important things remove potential options from your list.
Poor Financial Planning
1. Spending everything on a down payment
According to a recent LendingClub survey, 64% of Americans now live paycheck to paycheck… and inflation isn’t helping. This means 2 out of 3 people (that’s 166 million adults in the US) can’t pay their bills if they miss more than a couple weeks at work. That’s a lot of pressure.
In today’s market, you have to be very disciplined if you want to reach a down payment savings goal, setting aside tens of thousands of dollars just to qualify for a mortgage.
It can be tempting to spend it all once you’ve hit your goal, but we suggest being patient and holding out just a little bit longer. This will give you more time to save, build a cushion, and take the weight off your shoulders the next time unexpected costs pop up.
2. Forgetting about extra costs
Equipment repairs, trip charges, property taxes, utility deposits, all the little things you need from Target… these receipts stack up fast!
By setting aside another $2,000 – $3,000 before you buy a home, you should have a nice cushion to keep you from sweating at the payment screen.
3. Failing to secure gift money
Did you know that gift money can be used towards your down payment? If a friend, family member, employer, or charity is willing to help you buy a home, mortgage lenders just need proof of their ability to make the contribution before they will adjust your pre-approval amount (a larger down payment can boost your buying power).
Follow these steps before you go under contract on a new home. If you wait too long and a gift amount changes or becomes unavailable, the entire deal could be jeopardized (and it happens more often than you’d think).
Step 1
Before you contact a lender, get clear about your gift amount and the time when it will be available.
Step 2
Tell your lender about the gift.
Step 3
Complete the gift letter (provided by your lender) before going under contract.
4. Making bad credit decisions
Mortgage lenders consider a lot of factors when determining how much you can afford. Showing good credit history is a great place to get started.
Things you shouldn’t do before submitting your pre-approval application
- Don’t make large purchases on your credit card
- Wait to buy large items, like furniture, vehicles, tools, etc.
- Don’t open new credit accounts
- Don’t miss payments
5. Carrying a high debt-to-income ratio
When lenders evaluate your finances, they look at something called your debt-to-income ratio. This shows the margin between how much you make and how much you’re required to spend on debts each month.
The name of the game here is to look less risky, so without a positive margin in your budget, lenders will be less likely to give you a big loan amount.
If you currently spend the majority of your income on fixed expenses, start looking for ways to reduce them before you put in those home loans applications.
6. Taking the first interest rate you find
Shop around for low interest rates! It’s tempting to accept the first offer you’re given, but don’t sign on the dotted line before you’ve done your research.
There are plenty of mortgage lenders out there, but at the end of the day, finding the best deal is what matters most. Your loan will likely be re-sold to another company shortly after your deal closes, so don’t be fooled into thinking you’ll get to work with the same team for the full term of your loan.
7. Overlooking government loans
If it’s your first time buying a home, knowing where to start can be difficult. Home prices keep rising, which means your savings goal has likely changed just to cover that big down payment towards a conventional loan.
But conventional loans aren’t the only types of mortgages out there. There are three common alternatives you’ve probably heard about, and they’re all insured by the government.
Federal Housing Administration (FHA)
- Only 3.5% down
- Minimum 580 credit score
- Must pay mandatory mortgage insurance, both annually & upfront at closing
U.S. Department of Veterans Affairs (VA)
- VA loans only available to active-duty, veteran military service members, and their spouses
- No down payments
- Lender fees are capped to protect borrowers
U.S. Department of Agriculture (USDA)
- Some USDA loans do not require a down payment
- Borrowers must meet certain income limits to qualify
- Homes must be purchased within a USDA-eligible area
Contract Mistakes
1. Breaking your lease
If you currently pay someone rent and don’t know what your lease says about leaving early, you could end up owing a lot of money to your landlord. Every rental agreement is different, but many leases require tenants to forfeit their security deposit plus one month’s rent if they leave prior to the agreed expiration date.
Depending on where you live, that mistake could cost you thousands of dollars. To avoid paying penalties, be sure to read through your lease before you share the news that you plan to move out.
Can’t find a copy of your lease? Ask your landlord to send one over.
2. Waiving the home inspection
A home inspection proves that the condition of the property actually matches the description posted by the seller. This report helps buyers know exactly what they’re getting and keeps them from paying more than they should.
Consider it a major red flag if a seller asks you to waive the home inspection. Agreeing to this would be like buying a car at full price without letting your mechanic check the engine first.
In most cases, lenders will require buyers to get a home inspection so they have 3rd party proof that a property is worth the agreed upon closing price. Sometimes cash buyers who are motivated to move quickly will waive the inspection, but this exposes them to a lot of risk while only shaving off one week from their closing timeline.
Here’s To No Regrets!
The easiest way to avoid home buyers remorse is by trusting a local real estate expert to guide you to the closing table.
When you’re ready to work with an experienced, professional Realtor®, call our office at (208) 278-4300
We love helping people just like you find great places to live in Boise and can’t wait to help you close on your new home!
