The 10 Biggest Home-Buying Mistakes

So, you're ready to take the plunge and buy a new home.  Maybe it's your first brush with the American dream.  Maybe you're moving up in the world.  In any case, the same pitfalls await whether you are a first-time homebuyer, minority buyer, or a seasoned homeowner.  It pays to be careful as you enter into a home purchase transaction.  The following are the 10 most common mistakes made by homebuyers.  (From Idaho Housing and Finance Association Cornerstones Magazine, Fall 2006)

1.  You didn't set a budget.
Experts say your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.

2. You picked the wrong mortgage.
Pick your financing package with care.  There are an array of choices that offer different rate options and terms.  Keep in mind that adjustable rate mortgages have risks when interest rates go up and that shorter-term mortgages will cost a lot more per month since you are paying your loan off faster.  Many programs exist to help first-time homebuyers in financing their first homes.

3.  You picked the wrong community.
If you don't like the location, you'll be unhappy and you may have a hard time selling your property if the community isn't a good fit.  Ask around and do your homework about the community and the resources it offers.

4. You didn't know what homes really cost.
Make sure you are getting a good deal by comparing the cost of your home with similar homes in the area.

5. You used a bad real estate agent.
Get an agent who works for you and understands your needs and financial limitations.  Get references and pick an agent who has significant experience in the area you want to live and in the price range you're looking for.

6. You never went back to check on the neighborhood.
Go back and see what the neighborhood is like at various times of the day and the week.  Know as much as possible about the neighborhood before you commit to buy.

7. You forgot to consider resale.
You may be drawn to a home that has quirky features, no closets, or one time bathroom, but other buyers may not be.  When you buy, think about features that may turn buyers off when it comes time to sell.

8. You bought the most expensive home on the block.
Your neighbors' home values will dampen your home value.  Steer clear of homes that cost substantially more than surrounding homes.

9. You didn't do an inspection.
Never buy a home without having it inspected by an experienced and independent inspector.

10. You forgot about closing costs.
Closing costs typically range from three to five percent of a home's purchase price.  Ask you mortgage lender to provide you with a close estimate of closing costs.  Include those closing costs in your financial estimates to avoid surprises at closing.