3 mistakes to avoid when buying a house
If you’re buying a house, it’s imperative that you do your research and plan ahead. This means studying what to do, while also being informed on what not to do. As a result, you’ll find yourself in a position to make an informed decision that benefits you both in the short-term and over the long run.
3 Mistakes You Should Avoid
There are few (if any) financial decisions more significant in life than buying a house. It typically requires thousands of dollars upfront, plus hundreds of thousands of dollars in long-term debt that could potentially stick around for up to 30 years. In other words, buying a house is a major commitment and it must be taken seriously.
If you’re going to buy a house, you need to be absolutely, positively certain that you’re making the right decision. And while it doesn’t have to be your “dream” house or “forever” home, there are certain mistakes you’ll need to avoid in order to ensure you maximize your time, money, and energy. Let’s take a look:
1. Don’t Buy a Home When You Have Lots of Debt
This should be common sense, but it’s amazing how all logic seems to go out the window when someone decides they want to buy a house. So let’s be crystal clear: If you have significant amounts of existing debt, buying a home is not the right move for you at the moment.
Whether it’s credit cards, student loans, cars, or medical bills, attempting to pile hundreds of thousands of dollars of additional debt onto a stack of existing debt is like trying to slap some paint on a rotting windowsill. It might look fine for a little while, but it’ll eventually fail you.
Wait until you’ve paid off bad debt - or at least the majority of it - before even thinking about buying a house. Otherwise debt payments will eat up the majority of your income and leave you in a situation where you have a nice house but are living paycheck to paycheck.
2. Don’t Rush the Purchase Decision
This is one of the biggest mistakes homebuyers make (and it’s often the hardest to prevent). Shopping for a house is an emotional process and it’s easy to feel the pressure mount in a buyer’s market. Here’s how this usually happens:
- You find a house that you love.
- You put in an offer.
- The seller goes with someone else’s offer.
- You tell yourself that this won’t happen again.
- You make a foolish offer on the next house and overpay.
- You end up overpaying for a house you can’t afford, which haunts you for years to come.
It’s easier said than done, but you have to remove your emotions. If the numbers don’t work, they don’t work. Avoid cutting corners and making exceptions. It might take longer to buy a house, but you’ll never have to regret making a bad choice.
“Don’t rush into the decision, take your time, do a thorough lender and home loan interest rate comparison, ask around, get your financial documents in order and ask for help if needed,” Savings.com.au advises. “This decision would probably be one of the most important ones in your life, so do not take it lightly!”
Patience and poise are important ingredients. Buying a house without them could prove to be painful and costly.
3. Don’t Put Down Less Than 20 Percent
With certain types of loans offering 3.5 percent down (or even less), it’s tempting to think you can afford more house than you really can. But as a general rule of thumb, you should never buy a house unless you can afford to put 20 percent down in cash.
Not only does a 20 percent down payment give you more equity and a lower monthly payment, but it also helps you avoid something known as private mortgage insurance (PMI), which can cost you as much as one percent of the entire loan amount on an annual basis.
Surround Yourself With the Right People
If you’ve never purchased a house before, or if it’s been a while since you’ve bought a home, it’s easy to feel confused by the process. Even with the knowledge you’ve been exposed to in this article, you may still feel overwhelmed.
One of the best ways to fight these feelings is to surround yourself with smart people who have experience making wise home buying decisions. Whether it’s a skilled real estate agent, a wise parent, or a trusted friend, having the right people on your team will benefit you tremendously as you approach this all-important opportunity.