In a perfect world, buying a house would be an easy and fun experience. And truthfully, it is exhilarating finding a new home and laying claim to it. But it’s also frustrating, exhausting, arduous, and more expensive than you anticipate. The malaise you experience when shopping for a house—particularly if you are operating on a limited time frame—can lead to some not great decisions. Here are some common home buying mistakes that you do not want to make.
1. Letting the stars in your eyes blind you to practical considerations. I call this The Money Pit effect. In that film, the two would-be homeowners let themselves fall in love with the potential of the enormous house, rather than focusing on what would really be a good fit for their needs. The Money Pit effect could lead you buy a house in a “transitional” neighborhood, or one that is too far away from work, or one that is far too big or small for your needs. No matter how “perfect” the house may be, if it doesn’t fit your needs, you’ll be unhappy living there. Let it be the house the got away and remember it fondly, but do not put an offer on it.
2. Buying the most expensive house on the block. While I will never be someone who advocates buying a home with an eye to resale—living that way leads to a life of beige carpeting and never really feeling as though the house is yours—it is a savvy strategy to buy a home that fits within the price points of its neighbors. Not only will it increase the likelihood of you being able to afford the home, but it will decrease the likelihood of pricing potential buyers out of the neighborhood. Buy the priciest house in the neighborhood if it’s a home you can live happily in for years to come, but otherwise, choose a home that has room for its value to go up.
3. Being unwilling to walk away. This is a corollary to the Money Pit effect. For some people, once the offer is placed on a house, they envision themselves living there and ignore problems found during the inspection, issues with obstinate sellers, and other warning signs.
Before my husband and I moved into the house we currently own, we were in contract on another home. However, the owners refused to replace the roofs on the house and garage, which would have been an immediate and very large expense for us as new owners. We tried to negotiate with them several times, and ultimately we walked away from the deal. Walking away cost us in time—we were moving to a new area and had a baby on the way—but the sellers’ attitude toward a basic home repair worried us. We hated the idea of finding other issues that they decided were optional. Since we ended up in a home in a much better neighborhood, we regard our experience as a bullet dodged. We could have made a huge mistake just because we didn’t want to lose the time and money we’d already put into that first house.
4. Choosing your team poorly. Buying a house is a team sport, and you want to make sure you can trust everyone you’re working with. While we understood the necessity of using a realtor we could trust, we forgot this important advice when shopping around for a mortgage lender. We went with an internet bank that offered the absolute lowest rate we could find. Unfortunately, that meant that we were dealing with bankers who were off-site and unwilling to help us. The month before closing saw us fielding a dozen emails a day asking for more and more arcane financial information—and the underwriter assigned to our mortgage refused to ever answer the phone.
If we had it do over again, we’d sacrifice some of our percentage rate to have a local and trustworthy lender who treated us as team members, rather than criminals.
5. Making a big purchase just before closing. When you get to within a week of your closing date, it may seem like everything will be smooth sailing until you pick up your new key. But making a major purchase on credit just prior to your closing date can change the financial picture your mortgage lender has used to determine your loan—and jeopardize your closing.
Once you have completed your home loan application, do not finance a car or purchase furniture, appliances, electronics or garden equipment on credit. Otherwise, you’ll find yourself with a new car and no garage to keep it in.
Buying a home is one of the most important purchases you’ll make in your lifetime. Make sure that your decisions are made rationally rather than emotionally, and your purchase will go that much more smoothly.