Buying a home is likely the largest purchase you will ever make. This is not the time to make mistakes that could easily plunge you into a financial situation you cannot afford.
During my 18-year career as a real estate broker, I learned a lot of things but none as valuable as what not to do! I didn’t learn this in a seminar or while studying to pass the licensing exam. I witnessed real-life situations where buyers did really dumb things related to buying real estate—buyers who then went on to regret the decisions they’d made.
Avoid these five home-buying mistakes and you will avoid getting in over your heads with a house you cannot afford—and save yourself many thousands of dollars and heartaches in the process.
Mistake: Allowing a lender to determine how much you can afford
When you meet with a lender to get pre-approved for a mortgage, that lender is going to tell you how much house you can afford and how much money the company is willing to lend to you. Understand this: He or she is concerned about only two things: 1) Your ability to repay the mortgage and 2) the size of his commission.
This lender wants to steer you into the biggest mortgage possible. Ignore that number. It is not based on what you can afford because the lender has no idea what you can afford.
You need to set your own housing budget before you ever sit down with a lender or other real estate professional, which is based on your specific financial situation and lifestyle. And that housing budget should be realistic enough so that you can afford to make progress on all your other important financial goals like maintaining a healthy emergency fund, getting debt-free, and funding retirement accounts. Read more