Buying a house is a big (and exciting) step. But regardless of whether you’re a first-time home buyer or have bought before, there are some mistakes to avoid when purchasing a house. Here are a few to watch out for.
Getting in over your head
If there’s one mistake you want to avoid for sure when purchasing a house, it’s getting in over your head. You don’t want to buy more house than you can comfortably afford based on your current situation — not on some improved situation that you think you’ll probably be in down the road.
Don’t base what you can afford on what the mortgage lenders or mortgage calculators will tell you, either. The general rule of thumb is that your mortgage payment should be anywhere from 28%-33% or less of your gross monthly income, where “mortgage payment ” includes principal, interest, taxes, and insurance.
Spending up to 33% of your gross income might be perfectly fine, but it’s going to depend on your individual financial situation — and you’re the only one who can determine that. Lay out a spending plan and make sure the payment you have in mind is going to work for you. Don’t forget to account for the additional expenses that are often associated with owning a home too — things like repairs, yard work, maintenance, furnishings, and possibly higher energy bills and car insurance bills. Think about what things might be like in the event of a job loss too.
Looking at houses that are out of reach
Once you’ve determined how much you can actually afford, avoid spending your time looking at houses that are out of your price range. Yes, you can try to get a steal on a house you couldn’t otherwise afford, but if the houses you’re looking at are more than you can afford, what’s much more likely to happen is that you’ll start to justify spending more. The ones that are in your range won’t seem quite as nice, and you’ll be tempted. Temptation leads to overspending, which leads to trouble down the road and being house poor.
Buying in the wrong area
Thanks to the recent housing bubble, we all know now that house prices do not always increase. Since you can’t depend on being able to sell a home quickly when you need or want to move, be sure to buy in an area that’s right for you, both now and in the future. Check out the schools, crime rates, and your surroundings. What’s likely to be built in the future? What’s likely to go away? Don’t count on possible changes, but be aware that they could occur — for better or worse. Your neighbors are going to have the biggest impact on how much you enjoy your home, so be sure to stop by at multiple times during the day and on different days of the week to get a feel for what the neighborhood you’re interested in is typically like.
Having your heart set on a particular home
Emotion-based buying can cost you, so don’t get your heart set on a particular home when negotiating or reviewing the results of your home inspection. (You should get a home inspection to root out potential issues.) Remember that there are other houses out there. The more you’re willing to wait for a house that truly meets your needs (including the financial ones) the better off you’ll be.
When it comes to the mistakes to avoid when purchasing a house, remember that forewarned is forearmed. By taking the time to learn about the home buying process and thoroughly investigate your options, you’ll be in better shape when you buy your home.
This is a guest post by Jackie Beck. A lifelong entrepreneur who started her first business in the 2nd grade, her current project is the successful Pay Off Debt iPhone & iPad app for those looking to snowball debt. She writes about money, goals, and passive income ideas at MoneyCrush.com.