|Three innocent mistakes home buyers
and how to prevent them!
Julie Garton-Good, GRI
A survey conducted by the Federal National Mortgage
Association (FNMA or Fannie Mae) asked consumers to comment on the greatest
hurdles they perceived in buying a home. Their primary response? Not knowing HOW
to! They often delayed purchasing because they assumed it was much more
difficult than it actually turned out to be.
This survey points out the importance of educating yourself
before, during, and after the home buying process. Let's identify the most
prevalent mistakes home buyers make and solutions for each.
Mistake #1: Check your heart
My philosophy as always been that buyers purchase with their
hearts, and justify the purchase with their wallets! Kept in check, emotions are
a great motivator; but too much emotion is one of the prime reasons why people
pay too much for a home, choose a costly mortgage, and fail to maximize home
affordability once they do purchase. Euphoria can blur bottom-line logic.
Take the example of a young couple who purchased an
overpriced home because it had pink carpeting in the bedroom. The wife had grown
up in a home where her bedroom was draped and carpeted in Pepto-Bismol
pink. In an effort to relive those pleasant childhood memories, the wife just "had
to have" the house. So the buyers agreed to the seller's inflated and
unrealistic price. Long after the pink carpeting was worn out, the buyers were
still paying interest on those runaway emotions. (I know this is true---I WAS
The solution? Temper what your heart tells you with cold,
hard facts. Evaluate if you're ready to handle "The Three C's of
Homebuying: Commitment, Credit and Cost. Long after your emotional high has
subsided, you'll be locked into the responsibilities of home ownership
(commitment), keeping yourself creditworthy to handle emergencies (credit), and
paying both the mortgage payment and costs of home ownership for the long haul
(cost). If you're willing to accept these challenges, then your heart is
probably leading you in the right direction!
Mistake #2: Watch your timing
For the most part, the advantages of home ownership far
outweigh the disadvantages. But a buyer's timing must be right in order to reap
the greatest rewards as a homeowner.
- Look at the crystal ball of your future.If relocating is in your future, make sure you purchase in an area of
high appreciation so you'll have ample equity when you need to sell. And ask the
lender to make sure you're not paying excessive discount points that result in
money you can't recover when you sell.
- Take a (brief) look at your employment picture.Americans tell us their greatest fear after purchasing a new home is
losing their job. But this fear certainly shouldn't stand in the way of you
taking the homebuying plunge.
Here's why. Purchasing a home allows you to accumulate
equity. For many people, this becomes a major source of savings.
Second, should you become unemployed, you could always tap
into your home's equity. In fact, some equity loans don't require employment as
Lastly, you'd be paying rent anyway, often in an amount
equal to or exceeding the amount of a mortgage payment. Why not make it an
investment in your own home?
The bottom line is that unless you know that unemployment is
imminent, you're financially ahead of the game to purchase a home.
Mistake #3: Look in your wallet well in advance of home
- Analyze your assets.Pull together all information regarding your financial holdings
including cars, boats, and other personal property.
You'll need a complete list of these items for the lender,
so it's best to do it well in advance of that appointment.
- Decipher your debts.Do the
same with your debts. This is no time to "forget" to disclose a bill
that you owe. The lender is likely to find out about it anyway.
- Access your credit report.If
you have never seen a copy of your credit report, now is a good time to access
one. In fact, by calling a toll free number, (800) 682-7654 for TRW (one of
three national credit reporting agencies) will tell you how to apply for your
own free credit report by mail. Or visit your local TRW office to obtain your
To make sure you're adequately prepared to take the home
buying plunge, make sure you visit the continuation of this article entitled, "Three
More Dangerous Mistakes Home Buyers Make!"
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