Better Money Habits®: 6 homebuyer mistakes to avoid
This is just a quick summary of the kinds of mistakes many people make when shopping for a home. For more details, read the full article '6 homebuyer mistakes to avoid.'
Whether you're buying your first home, or are considering purchasing a vacation or investment property, here are six common mistakes to avoid.
Mistake #1: Spending more than you can afford. Figure out how much you can afford to pay each month for your mortgage and expenses before you start shopping for a home. Then make sure you limit your search only to homes within a price range that fits your budget. The Bank of America Affordability Snapshot Tool can help you figure out how much you can comfortably afford to pay each month.
Mistake #2: Being unprepared to have your finances scrutinized. Remember, when lenders are in the process of deciding whether you qualify for a loan, they will evaluate your credit report while also comparing how much money you owe with how much you make. If needed, take the time to work on your score before you begin the home buying process so you can increase your chances of qualifying for a low interest rate.
Mistake #3: Not understanding the difference between pre-qualification and pre-approval. When you pre-qualify for a mortgage, you simply receive an estimate from a lender of what they may lend you, which can help you decide what your price range should be. A pre-approval is a conditional loan approval. Final loan approval is subject to satisfactory appraisal and title review and no change in borrower credit and financial condition.
Mistake #4: Skipping the home inspection. The home inspection is an added expense that first-time buyers may feel tempted to skip, but it's a very important step. Professional inspectors often notice things most of us don't, and if you catch potential problems up front, it can help with negotiating the price. You also lessen the risk of buying a home that costs you more in the long run because of expensive repairs.
Mistake #5: Failing to account for closing costs. Buying a home involves closing costs beyond the down payment, so make sure you've included an estimate of these costs when you set up your home buying budget. For an idea of how much you might need, use the Bank of America Closing Costs Calculator.
Mistake #6: Overlooking additional expenses of home ownership. Property taxes, homeowners insurance and regular maintenance costs are all a part of owning a home. You may also need to pay fees to a homeowners association or co-op board. Build these expenses into your home buying budget as well.
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