Home Buying Tip: Avoid These Costly Mistakes

Doing the right things can save you a lot of money. Doing the wrong things can cost a lot of money. Here are some of the more common mistakes people make when buying a home. Read over this list to be sure you aren't making these mistakes.

Giving Earnest Money To The Seller

Never give a deposit to the seller with your offer. Give your earnest money deposit to a real estate agency, if they have an escrow account for this, or write the check to an escrow service. If the seller has the money and you need to back out of the purchase for valid reasons (reasons allowed for in the offer), the seller may disagree and try to keep the money.

Forgetting To Switch Utilities

The man who bought our last house forgot to switch utilities, and I had them shut off after closing. Fortunately, he had them reconnected before the pipes froze, or this could have been a costly mistake.

Paying Off Credit Cards

While it may seem like a good idea to pay off those cards and so lower your debt before applying for a loan, it isn't always so. Ask the lender about your options. I know of a woman who paid off all her cards, and then couldn't get a loan because she didn't have enough cash left for the down payment the bank required. They would have loaned the money if she still had a credit card balance or two.

Falling In Love With Homes

The time to fall in love with your new home is after you move in. If you fall in love with that home the moment you see it, it can cost you a lot of money. You will easily overpay to get it. Keep your cool, and remember that there are many nice homes that will suit your needs.

Not Looking At The Real Costs

Many people think of their new home cost as the monthly payment. To fairly compare your new home to renting, or to just know for sure that you can afford it, you need to look at all the costs. These may include taxes, insurance, heating, electricity, homeowners association dues, water, garbage collection, and repairs (guess on this - there will be repairs).

Not Considering All Options

Many think they can't move to towns they like because jobs pay less there. They rarely consider whether the homes cost less, or the cost of living in general is less. They could be better off financially and live where they want to be. People also assume they need to live in certain types of homes. If a style of house is the most important thing to you, that's fine. On the other hand, if you want to travel, be more financially secure, or use more of your money to help others, consider your options. A nice modular home can be half the price and even more comfortable than many site-built homes.

Thinking Price Is All That Matters

The price you pay is only part of the cost of owning a home. Taxes, insurance, the interest rate on the loan, and even the extra money you spend to drive to work from a distant home - all these should be taken into consideration when looking at homes.

Needing To Win

Do you need to always get a lower price? This need to be a "tough negotiator" can cost you. You might have paid $150,000 for your perfect home if it was listed at $165,000, right? But what if the same home was listed at $149,000? Would you insist that you have to get it for thousands less, and lose a great home because your offer is rejected? A good deal doesn't necessarily have anything to do with the asking price. It is about your needs and the market value.

Not Asking Enough Questions

I recently looked at a closing statement that had several questionable charges. The buyer didn't understand what they were for, but we did figure out that at least one charge, for $375, was for an appraisal fee that she had already paid. Obviously, not asking enough questions can be expensive.

Cheap Homes continues with Chapter 28 here: More Ways to Save Money