When you’re ready to buy a home, you’re probably doing it for the first time or perhaps the second, but it’s not a regular activity for most people. Property investors learn many lessons from the time they start to the time they become savvy enough to handle the roller coaster process. That’s a reality which never really changes, the fact of the matter being, buying real estate, be it a primary residence, a vacation home, or as an income investment typically comes with its share of surprises.
Things are bound to pop up during the process, from the initial search to the purchase offer, negotiation and acceptance, to the inspections and appraisals, to the closing table. Each step of the way, there’s something which subtly or greatly changes the dynamics and that’s why so many buyers make common home buying mistakes.
These are plenty and even buyers who make a living negotiating business deals fall prey to them. That’s because it’s no longer “just business”, but their personal lives. This has a profound and real impact on judgment and decision making. It’s something that real estate brokers and agents deal with on a daily basis. They see it firsthand over and over again and try earnestly to prepare their clients for what lies ahead in buying or selling a residential home.
Getting the Right Financing
It’s certainly not just emotion that causes problems for buyers, it’s also a matter of mathematics and feasibility. True, emotion does play a role in the financing application and approval process, but it’s not the only thing. Getting ready for financing means being realistic about where you actually stand and taking measurable steps to get the right product for your budget.
“Buying a home is not an everyday activity. There's a learning curve, which explains why real estate experts see the same blunders again and again. From confusing the seller's agent for your new best bud to putting all your available cash on the table at closing, here are six common -- and costly -- mistakes homebuyers make.” --Bankrate.com
Start with your monthly budget and begin to look seriously at your debt obligations. If you want to get the best possible deal for a mortgage, you’ll have to be open and honest about your situation. Begin by ordering copies of your credit reports and going over each one line by line. In addition, start a methodical process of paying off debt. Your goal is to get as much or all inaccurate information off your credit report and bring your debt-to-income ratio down below 35 percent at the very least. Aim lower, for 30 or even 25 percent and you’ll become quite irresistible to lenders.
During this time, do not incur new debt, open up new lines of credit, or change jobs. Lenders love stability and as much consistency as possible. If you have the ability, start saving money aside from your down payment for closing costs and an emergency fund which equals two to three months.
Avoid These Emotional Home Buying Mistakes
Once you have shopped around and gotten your financing in place, it’s time to start the house hunt. Most buyers don’t struggle with their preparation for getting a mortgage because it’s part of the goal in buying a home. However, when it comes time to make an offer, that’s where emotional home buying mistakes become a real problem. Here’s what you should avoid:
Expecting an offer acceptance to lead to more price negotiation. For some strange reason, there are buyers who assume if they have a purchase offer accepted, that begins the price negotiation process, but sellers certainly don’t see it that way. The seller’s likely reaction is to start entertaining backup offers and stick with the agreed purchase price to get you to go through with the deal or withdraw.
Waiting to the eleventh hour to ask for concessions. Here again, this is something that should be done before making an offer or at least, an offer with your best price. It’s a mistake to believe the seller will make concessions simply to facilitate the sale. It’s better to go in with a higher offer and ask for concessions than make a lowball offer and request concessions or credits.
Chasing a deal no matter the cost. This is probably where most buyers go wrong. They become emotionally attached to the property, fearing they’ll lose it to someone else. Don’t keep upping your price if you can’t afford it because you’ll be stuck in a bad situation after.
Believing you don’t need professional help. Get an experienced broker or agent and follow their advice. They do this for a living and won’t be impaired by emotional decisions.
Not thinking like a home seller. Think about selling the home you’re buying in the future, because it’s likely to happen. In other words, don’t ignore problems like being on a high traffic street because it will still be there when you sell later.
Remember, buying a home is a financial investment; so, it’s very important to keep your emotions in-check and think things through.