Purchasing a home is both exhilarating and daunting. With soaring home prices and shifting mortgage rates, thorough preparation is key to a smooth transaction. Overlooking crucial steps or making ill-informed decisions can prove financially disastrous.
Key Takeaways
- Get pre-approved for a mortgage before house hunting
- Check your credit report and score ahead of applying
- Align on desired features/priorities with co-buyers
- Thoroughly research neighborhoods beyond the property
- Avoid maxing out at the top of your pre-approval amount
- Never skip the professional home inspection
- Postpone major purchases until after loan closing
7 Costly Home Buyer Mistakes to Avoid
To ensure a smart investment and satisfying purchase, sidestep these 7 costly mistakes too many home buyers make:
Shopping Before Getting Pre-Approved
Tempting as it is to dive straight into open houses, taking this step first can lead to heartbreak. Without a pre-approval letter from a mortgage lender, you won’t know your true price range.
Pre-approval involves sharing documentation like W2s, pay stubs, and bank statements. The lender then lets you know the maximum mortgage amount you qualify for based on your:
- Credit profile
- Income and assets
- Existing debts
- Down payment amount
With a pre-approval in hand, you can confidently search for homes fitting your budget. It also signals to sellers you are a credible, well-qualified buyer when making offers.
“Getting pre-approved allows you to hit the ground running with a clear price range tailored to your financial profile.” – Sandra Williams, First Metro Bank
Failing to Check Your Credit
Your credit score plays a pivotal role in mortgage approval and securing favorable interest rates. Before even engaging with lenders, request your free annual credit report from each of the three major bureaus:
- Experian
- Equifax
- TransUnion
Review the reports thoroughly for any errors or potential fraud that could be dragging down your score. If your credit rating falls into the poor or fair range, take steps to improve it by:
- Paying down credit card balances
- Removing inaccurate negative items
- Avoiding new credit applications
Raising your score into the very good or excellent tier (760-850) could translate into tens of thousands in interest savings over the life of your loan.
Not Having a Clear Home “Must-Haves” List
While you may have a vague vision, buying a home requires getting laser-focused on your priorities. Before tours, sit down and hammer out a definitive list of desired features and amenities you need in a property.
For a growing family, this could include:
- Minimum number of bedrooms and bathrooms
- Highly-rated school district
- Fenced backyard
- Neighborhood amenities like parks and playgrounds
For a remote worker, the priorities may lean toward:
- Dedicated home office space
- Reliable internet connectivity
- Quiet, low-traffic neighborhood
The key is aligning upfront with your spouse, partner, or any co-buyers on your collective “must-haves.” While you can’t expect perfection, finding a home that meets most of those core needs increases satisfaction.
Neglecting to Research Neighborhoods
When house hunting, it’s easy to zone in solely on a property’s interior and price tag. However, the neighborhood itself warrants equal scrutiny, as it impacts daily living, commutes, safety and more.
Beyond visiting the area, leverage tools to evaluate crime rates, school performance data, walkability scores, and proximity to:
- Shopping/Dining
- Public transportation
- Parks and recreation
- Major roadways
Additionally, drive through at varied times—workday morning, evening, weekend—to get a true feel for activity levels and community vibe.
“The home you buy is just one part of the equation. You’re also buying into a neighborhood and broader area, so do your due diligence before committing.” – Jen Adams, Realtor
Purchasing More Home Than You Can Afford
When a mortgage lender pre-approves you for a certain amount, that figure represents the absolute maximum—not necessarily what you should spend. Many buyers mistakenly stretch to that upper limit, and then struggle with unaffordable housing costs.
Beyond your monthly principal and interest payment, factor in:
- Property taxes
- Homeowner’s Insurance
- Potential HOA fees
- Ongoing maintenance and repairs
As a general guideline, your total housing expenses should not exceed 28% of your gross monthly income. So for a household earning $8,000 per month, that caps housing costs around $2,240.
| Income | Housing Cost Cap |
| $5,000 | $1,400 |
| $7,500 | $2,100 |
| $10,000 | $2,800 |
Straying well beyond this 28% threshold puts you at risk of becoming “house poor,” with little left over for retirement, emergencies, or other goals.
Skipping the Home Inspection
You’ve fallen in love with a home and don’t want any snags—so skipping the inspection seems tempting to keep things moving. However, this is one of the biggest blunders a buyer can make.
A professional home inspection, typically costing $300-600, provides an invaluable, impartial assessment of the property’s condition from the:
- Foundation and structure
- Exterior and roof
- Electrical and plumbing systems
- HVAC equipment
- Appliances
- Attic and basement
Inspectors have the expertise to identify issues, safety hazards or repairs needed that you likely missed. These findings then allow you to renegotiate the price, request repairs from the seller, or even back out of the purchase if problems prove too severe.
Making Major Purchases During Underwriting
You found the perfect home and already envision how you’ll furnish and upgrade it. However, any major purchases or new loans during the underwriting process raise a red flag to mortgage lenders.
Your debt-to-income ratio and credit utilization are closely monitored until your loan closes. Taking out that Best Buy credit card for new appliances or furniture financing could jeopardize your mortgage approval.
Rather than derailing your purchase at the finish line, hold off on any:
- New credit card or loan applications
- Car purchases or leases
- Appliances, electronics, or furniture
- Any large, unplanned expenditures
Celebrate first, then shop once you’ve cleared closing without incident.
Conclusion
While an exciting milestone, the home-buying journey comes with many potential pitfalls that can saddle you with an unaffordable property or undesirable living situation. Avoid these 7 critical mistakes:
- Shopping before mortgage pre-approval
- Neglecting your credit standing
- Misaligned priorities and wants
- Insufficient neighborhood research
- Overextending your budget
- Waiving the home inspection
- Incurring new debt before closing
Taking methodical steps and making informed decisions, you set yourself up for a smooth, successful path to homeownership. If you need assistance obtaining mortgage pre-approval, our team of lending experts is here to guide you.
