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Ten Mistakes Homebuyers Make

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If you’re in the process of buying a home — or planning to start the process in the near future — you may be making the same mistakes that real estate agents see time and time again. Watch out for these 10 common missteps that could throw a wrench into your buying process.

1. Not knowing your credit scores or how they will affect your home purchase.

First and foremost, order a copy of your credit report and check your credit scores before tackling the homebuying process. Lenders reference your credit history as a litmus test for your overall trustworthiness as a borrower. That’s why it’s so important that your credit scores be in good standing. High credit scores give you the best chance possible not only for being approved for a loan but also for securing the most favorable terms and interest rates from your lenders.

Know what your credit scores are and whether you need to take steps to improve them so that you aren’t caught off guard by a loan rejection or high interest rate. If you don’t believe your scores are high enough to qualify for a mortgage at competitive rates, concentrate on improving your credit history before starting the homebuying process.

2. Not contacting a real estate agent early enough.

Most people will begin to research homes online before ever contacting an agent, and they may even come up with a list of homes to see in person. However, when it comes time to seriously narrow down choices, potential homebuyers should contact a real estate agent.

Real estate agents may have access to additional properties not listed on popular online sites such as Zillow or Trulia. More importantly, they understand the ins and outs of the housing market. In addition to showing you otherwise unseen properties, they can lend important market insights into pricing in your area and other details that you couldn’t get on your own.

Try to find someone you can really trust by getting word-of-mouth recommendations. An agent’s knowledge about how competitive the market is in your area of choice can be very helpful when it comes time to negotiate with a seller on price and other details of an offer.

3. Not understanding the relationship between the buyer and the real estate agent.

Real estate agents can act in several ways. A buyer’s agent represents only the buyer’s interests, while a seller’s agent exclusively represents the interests of the seller. A “split” dual agency represents both buyer and seller, but each party works with a different individual from that agency. In a traditional dual agency, the same agent represents both the buyer and the seller.

It all comes down to where the agent’s fiduciary responsibility lies — in other words, whom the agent has a legal or ethical obligation to represent. If you’re a buyer dealing with a seller’s agent, for example, their primary responsibility will be to the seller. Chances are, they’ll try to talk you into offering a sum of money that benefits the seller more than it benefits you. Today, most buyers use a buyer’s agent so that they can feel more comfortable having frank discussions about the home purchase. You want to make sure you have someone on your team to represent your interests so you aren’t going through the negotiation process alone.

4. Not having a comprehensive home inspection.

A typical home inspection involves an examination of the condition of a property by a trained professional prior to closing. The U.S. Department of Housing and Urban Development (HUD) recommends using a certified home inspector. Be sure to ask about the inspector’s experience, what they look for during an inspection, whether the inspector offers the repairs noted during the inspection, how long the inspection will take, how much it will cost and whether the homeowner can be present during the inspection.

Veer away from inspectors with a potential conflict of interest, such as those who offer to make the recommended repairs. Also, be sure to get a copy of the written report after the inspection.

5. Not doing research to uncover potential issues the home inspection doesn’t catch.

In most states, the seller is required to issue a written property disclosure telling the buyer about any factors that could affect the property’s desirability beyond any structural damage that could be caught in a home inspection. For example, the buyer should be notified prior to purchase and closing if the home has been burglarized several times, if it’s in a neighborhood that experiences a lot of high-speed traffic or noise, or if it’s located in a historic district that may have special rules about home additions or repairs.

The problem is that disclosure rules vary from state to state, and the way information must be disclosed is somewhat of a gray area. It’s not uncommon for a seller to gloss over a disclosure by mistake, leaving the buyer stuck with the consequences. If you’re worried about non material factors affecting the desirability of your home — multiple burglaries, for example — you should search for a criminal history of the address online or call the local police department. If you know the home you want to buy is older or in a historic part of town, be sure to look into any regulations about repairs. Doing your research and keeping an eye out for special circumstances can help you down the road.

6. Not knowing about the neighborhoods where you are house hunting.

Again, do your research. Don’t make an offer on a home before you know whether it’s in a safe area, what the schools are like and whether residents enjoy living in the area. Vetting your neighborhood and surrounding community is just as important as vetting the house itself. You may have landed on the home of your dreams, but if it’s 30 minutes from the nearest grocery store or in an undesirable school district, it may not be worth the move.

7. Not knowing what your work commute will be like.

A majority of homebuyers say their potential work commute is an important factor in where they choose to live. Before making an offer, map out the commute online or even try traveling from the prospective home to your job during rush hour to get an accurate idea of what the daily commute would be like. If you’re dependent on public transportation, make sure the home you want to buy is in close proximity to the necessary trains or buses so that you aren’t stuck with a 30-minute walk twice a day just to get to and from transportation.

8. Not buying a home you plan to stay in long term.

If you’re not planning to stay in a home for more than a few years, you should really consider whether renting is a better option. A few years may not be enough time for the property to appreciate or for you to recoup the costs of buying and moving. The typical homeowner stays in the same home for around 13 years, according to the National Association of REALTORS®, so those who plan to move often may be better off renting to avoid repetitive transaction fees and low equity.

9. Not looking at homes you can actually afford.

According to HUD, when looking to buy a home, you should know that you’ll need money for a deposit, a down payment, closing costs and your monthly mortgage payment, which typically includes principal, interest, homeowners insurance and property taxes. National Association of REALTORS® recommends that you spend no more than 25 percent of your gross income on your mortgage and homeowners insurance.

More often than not, mortgage lenders will offer you a higher loan amount than you can reasonably pay back once you factor in things like property taxes and ongoing maintenance. Just because a lender is willing to loan you a larger amount doesn’t mean you should go for a more expensive home.

10. Not budgeting for expenses you’ll incur after purchasing a home.

Buying a home is a huge expense by itself — but the costs don’t end there. Homebuyers should set aside money not only for common housing expenses, such as utilities, but also for possible repairs and upgrades that come with owning a home. You’ll also have to pay property taxes, and, depending on your housing type, you may incur homeowners or condo association fees.

Homebuying is a complex process with a lot of room for error, but keeping an eye on these common mistakes can help you get through the process with as few hiccups as possible.

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