6 Rookie Homebuyer Mistakes to Avoid

When you’re investing large amounts of money into a home – whether it’s the family home or a rental property – you want to invest your money wisely. After all, this is a significant amount of money and you want to make the most of it, right?

Here are 6 common mistakes that home buyers make quite often. Avoid these and you’ll save yourself money and stress in the long run.

1. Not knowing your credit score. Your credit score is vitally important because it can mean the difference between paying higher interest rates and/or closing costs. Get a copy of your credit report, correct any errors, and pay down some of your revolving debt (such as credit cards) and you’ll have a chance to increase your credit score.

2. Opening new lines of credit during the mortgage process. When you get a new credit card or apply for a car loan, these processes tend to lower your credit score until you prove you can handle paying the additional debt. If you do this during the mortgage process, it will raise a red flag to the mortgage company and you run the risk of not being approved or having to pay higher rates.

3. Not having an inspection. Home inspectors can find problems with the foundation, attic, heating and air conditioning systems which might not be visible to home buyers. Avoiding the cost of a home inspection could actually cost you much more money in unseen home repairs.

4. Not hiring a lawyer. With so many people vested in the sale of this property (the seller, real estate agents, mortgage broker), it’s only in your best interest to hire an objective real estate lawyer to review your documents to be sure your best interests are met.

5. No contingencies in contract. Sellers don’t like potential buyers to back out of a deal but there are certain times when the exception should be made. Some common contingencies that are often written into contracts include: if the buyer fails to get financing, the house appraisal doesn’t match the sale price, or if there are major repairs needed to the property. With these in place in the contract, the buyer is protected from losing money in a money pit.

6. Not understanding insurance coverage. Insurance costs must be paid annually, whether the home is paid off or not, so it’s important to know those costs upfront and adjust your budget accordingly. Also thoroughly understand what is covered (usually fire, lightning, hail, and wind damage) and what is not (usually flooding, earthquake damage, or damage from neglect of maintenance) so you don’t have any great surprises in the future.