Summary: Are you gearing up to buy your first home, a move-up home or a second/vacation home? Shopping for a home is exciting, exhausting and a little bit scary. In the end, your goal is to end up with a home you love at a price you can afford. Sounds simple enough, right? Unfortunately, many people make mistakes that prevent them from achieving this simple dream. Arm yourself with these tips to get the most out of your purchase and avoid making 11 of the most costly home buyer mistakes that could put a hold on that sold sign going on the home you want. 1. Not Knowing What You Can Afford As we've all learned from the subprime mortgage mess, what the bank says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. If you don't already have a budget, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings and so on. Don't forget major expenses that only occur once a year, like any insurance premiums you pay annually or annual vacations. Subtract this total from your take-home pay and you'll know how much you can spend on your new home each month. If you end up looking at homes that are outside your price range, you'll end up lusting after something you can't afford, which can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can afford. You may even learn that you can't afford the type or size of home that you desire and that you need to work on reducing your monthly expenses and/or increasing your income before you even start looking. 2. Skipping Mortgage Qualification What you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income, so make sure to get pre-approved not, pre-qualified, for a loan before placing an offer on a home. If you don't, you'll be wasting the seller's time, the seller's agent's time, your buyer agent's time and your time if you sign a contract and then discover later that the bank won't lend you what you need, or that it's only willing to give you a mortgage that you find unacceptable. Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score prior to the closing transaction on the home, like finance a car purchase, apply for credit for furniture for the new home. If you cause the deal to fall through, you may have to forfeit the several thousand dollars that you put up when you went under contract. 3. Failing to Consider Additional Expenses Once you're a homeowner, you'll have additional expenses on top of your monthly payment. Unlike when you were a renter, you'll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs (which will occasionally include expensive items like a new roof or a new furnace). Also HOA fees if you are in a development that the HOA is mandatory. If you're interested in purchasing a condo, you'll have to pay maintenance costs monthly regardless of whether anything needs fixing because you'll be part of a homeowner's association, which collects a couple hundred dollars a month from the owners of each unit in the building in the form of condominium fees. 4. Being Too Picky Go ahead and put everything you can think of on your new home wish list, but don't be so inflexible that you end up continuing to rent for significantly longer than you really want to or never find a home you could like. First-time homebuyers often have to compromise on something because their funds are limited. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or forgo that extra bedroom. Of course,
