Buying a home is an exciting and life-changing experience, but it’s also one of the biggest financial decisions you’ll ever make. In order to set yourself up for success, it’s important to avoid common mistakes that can complicate the process or cost you more than necessary. Here are five critical mistakes homebuyers make—and a bonus tip to help you avoid a big mistake that could derail your entire purchase.
1. Not Paying Enough Attention to Your Credit Score
Your credit score is one of the most important factors in determining your ability to secure a home loan—and the terms of that loan. Lenders use your credit score, along with other factors like your debt-to-income ratio, to assess your financial health. It’s not just about having a high score; it’s about making sure all aspects of your financial profile are in good shape.
Before you start house hunting, it’s crucial to check your credit score and take any necessary steps to improve it. A small improvement can lead to a better loan rate and save you thousands over the life of your mortgage. Work with a qualified loan representative who can guide you in understanding and improving your credit score.
2. Failing to Get Pre-Approved for a Mortgage
Imagine finding the home of your dreams, only to realize you can’t make an offer because you haven’t been pre-approved for a loan. Getting pre-approved is an essential step in the home-buying process. Without it, you could be wasting time looking at homes that are out of your financial reach or missing out on the chance to make an offer quickly when you find the perfect property.
A pre-approval letter shows sellers that you’re a serious buyer and allows you to act fast when you find a home that meets your needs. In some cases, you can’t even tour homes without a pre-approval, especially in today's competitive market where sellers want to know you're financially ready to buy.
3. Not Working with a Professional Real Estate Agent
Many buyers try to navigate the process on their own, but hiring a qualified real estate agent is a crucial step in the home-buying journey. Real estate agents are experts in the local market, and they can provide valuable insight into pricing, negotiating, and finding the right home for your needs.
Best of all, you don’t even pay for the real estate agent's services—the seller typically covers the commission. A good real estate agent will advocate for your best interests, guide you through the paperwork, and help you avoid potential pitfalls in the buying process. Whether you're a first-time buyer or a seasoned investor, working with a professional real estate agent can make all the difference.
4. Overlooking the True Costs of Homeownership
When you’re house hunting, it’s easy to get excited about the monthly mortgage payment, but there are other costs that can add up quickly. Property taxes, homeowner’s insurance, maintenance, and utilities should all be factored into your budget when assessing a home.
Before making an offer, work with your real estate agent to get a net sheet or cost breakdown that includes all these expenses. This will give you a clearer picture of the true cost of homeownership and help ensure that the home you’ve fallen in love with is actually within your financial reach.
5. Not Being Realistic About Your Needs
It’s easy to get caught up in the excitement of looking at beautiful homes, but it’s important to stay grounded in reality. Consider your budget and the practical needs of your family first, especially when it comes to location. A gorgeous home in a great neighborhood is perfect, but if it's outside your price range, it’s not going to work long-term.
Start with location—your needs might include proximity to work, schools, or family. Once you’ve identified the right area, you can focus on the home’s design. Remember that things like paint, flooring, and appliances can be changed, but location can’t. Prioritize your “must-haves” (like school districts or commute time) over “nice-to-haves” (like countertops or flooring styles).
Bonus Tip: Avoid Major Purchases During Your Home Purchase
Here’s a bonus mistake that many buyers don’t realize until it’s too late: making big purchases during the closing process. Whether it's buying new furniture, taking out a store credit card, or applying for a home improvement loan, opening new lines of credit can seriously affect your ability to close on a home.
Lenders assess your financial stability throughout the process, and any significant changes in your credit profile could raise red flags. Avoid making any major purchases, including appliances, cars, or furniture, until after you’ve closed on the house and moved in. It's tempting to buy everything you need for your new home, but delaying those purchases until after escrow can help ensure that your financing stays intact.
In Conclusion
Buying a home is an exciting adventure, but it’s important to go into the process well-prepared and aware of common pitfalls. By avoiding these five mistakes—and keeping your finances stable during the buying process—you can set yourself up for a smoother and more successful home purchase.
Kelly is a full time Senior Real Estate + Relocation Specialist.
She + her dog GG live in Long Beach, California.
