5. Not understanding what it means to be part of an HOA
It's not uncommon for homes in newer developments to be part of a homeowners association, or HOA. HOAs are the governing bodies in housing communities. The dues you pay to them help cover things like communal amenities and common area upkeep. But those dues can be expensive, so before you agree to purchase a home that requires you to join an HOA, know what costs you're signing up for.
Keep in mind that HOAs aren't just about money; they can also be restrictive. Many HOAs set rules that dictate how your home must appear (at least on the outside) and whether or not you're allowed to have a pet. HOAs can also impose annoying parking regulations, which could be problematic if you’re a multi-vehicle family. Don't just see what that HOA costs; find out what its rulebook looks like.
6. Forgetting about closing costs
When you close on a home, there are expenses you must cover as part of that transaction -- things like appraisal fees, loan origination fees, and recording fees. Closing costs typically equal 2% to 5% of a home's purchase price, so factor them into your budget. Also, while you can often tack closing costs onto your mortgage, keep in mind that this means paying interest on them over time.
7. Not hiring a professional home inspector
Enlisting the help of a home inspector costs money, and if cash is tight, you may be inclined to rely on your own walkthrough instead. Bad idea. While certain issues, like water damage, can be easy to spot, there are plenty of potentially costly problems that can be harder to identify.
For example, a home inspector might unearth problems with:
- electrical wiring,
- plumbing issues,
- sinking foundations, or
- failing roofs.
A home inspector might also uncover hazardous substances, like asbestos or mold, that can be tricky and costly to remove. It's crucial to get an inspection before buying. If you don't, you could close on that home only to find yourself on the hook for thousands of dollars in repairs shortly after the fact.
Furthermore, once you get the results of your home inspection, don’t hesitate to use any negative findings as a negotiation tool. If your inspector finds mold that will cost $3,000 to repair, insist that your seller subtract that amount from your home’s purchase price or otherwise agree to rectify the situation before you close.
8. Letting a real estate agent pressure you to buy the wrong home
Working with a real estate agent can make your home search more efficient. But don't let that agent talk you into buying a home you can't afford or don't want. Remember, real estate agents don't make money unless they sell you a home, and while many conduct themselves with integrity, it's not unheard of for an agent to apply pressure in the hopes of snagging a commission.
If you feel like you're being pressured at any point during the home search process, find yourself a new agent. And don't ever buy a home because your real estate agent thinks it's a good choice -- he or she doesn't have to live there, whereas you do.
9. Not reading up on or exploring the neighborhood
It’s easy to fall in love with a home based on its layout and features and then decide that it’s the right place for you. But if you buy a home in the wrong neighborhood, you’ll likely wind up unhappy in it.
Imagine you’re a young family looking for a home in a thriving neighborhood with strong job growth, great schools, and lots of amenities geared toward children. If you don’t take the time to do your research, you might inadvertently end up buying in an area with an older population, mediocre schools, and a poor job market.
Another thing: See what traffic and parking are like in the area you’re looking to buy in. If you have young children, you might not want to move someplace with a town center that’s impossible to park in, leaving you to lug two young kids in a stroller for seven or eight blocks every time you need to stock up on bread or milk.
Spend some time exploring each neighborhood you’re thinking of buying in, both during the week and on weekends. That’s the best way to get a sense of what life will actually be like if you move there.
It's easy to stumble on the road to buying a home, especially if you're new to the process. Avoid these mistakes and, with any luck, you'll wind up with a home that suits your needs without breaking the bank.