Buying a new house can be costly, and certain things can make the process even more expensive. In this blog, we want to help you avoid mistakes that can drive up costs, so you can save more and focus on what really matters in your homebuying journey.
It's easy to get frazzled when buying a new home, especially if it’s your first time and you don’t know what to expect. Whether you’ve purchased several houses before or you’re a first-time homebuyer, there are steps you need to avoid to ensure you’re making the right decisions for your new house.
Before you make any home purchase, it is critical to complete a home inspection first. Home inspections are when someone comes to look at the overall infrastructure, safety, and state of the house you’re wanting to purchase. Some of the things they look at are the attic, roof, plumbing, electrical system, and HVAC units. A full home inspection ensures every part of the house is checked and cleared, since some inspections only cover specific areas.
The cost of a home inspection can vary depending on where you live and the size of the house you’re looking to buy. On average, home inspections cost between $350 and $500.
According to Home Inspecto, 86% of home inspections find issues in the homes assessed. While inspections can be expensive, they could help you save thousands of dollars in the future by knowing what repairs you’ll need to make, or they could even sway your decision not to buy a house if the results are major.
Negotiation is key during the homebuying journey. Whether you’re finding the best mortgage rate, realtor, or home price, it’s an essential skill for the process. Not negotiating a home’s price is an easy way to miss out on getting a lower monthly mortgage payment. That’s why you’ll need to know how to get the price you’re looking for strategically.
A buyer's market is when there is high inventory and low demand, while a seller’s market is when there is low inventory and high demand.
One of the best advantages you have in a buyer’s market is time. Since you’re not frantically searching for a house in a limited inventory market, you have several options to choose from and can go at your own pace. Sellers may be struggling to sell their homes, with inventory spending days on the market. You can use this as a negotiation strategy to encourage sellers to lower the price, make repairs, or accept contingencies.
Since inventory is low, sellers have more of an advantage because they know buyers are more desperate for a house. It can be tricky to convince them to lower the price, but it is possible. When the market is like this, it’s important that you stay in budget and don’t go in over your head on a house you can’t afford.
Another strategy is to be willing to compromise on things that are easy to fix or change. As long as it’s not a major issue or something critical that came up in a home inspection, it could be the sign you’re ready to move forward and buy.
Not getting pre-approval for your mortgage could be a significant mistake if you want to be a more credible buyer. Pre-approval is more than standard paperwork; it can serve as a stamp of approval, showing that a financial institution has reviewed and assessed your finances.
While there is no legal obligation to get pre-approved for a mortgage, it could make an impact when you’re homebuying if you don’t have one. A common issue is competition when you’re trying to buy. Buyers may favor someone with pre-approval over you because they know a financial institution has cleared them as a lender.
Pro Tip: Looking to get pre-approval, but you’re not sure where to start? Reach out to one of our Mortgage Champions to get the help you need as you begin your own homebuying journey.
Your down payment plays a significant role in lowering your monthly mortgage payment, so how you pay for it matters, too. When it’s time for you to buy your new house and pay for your down payment, you’re going to want to pay it with cash. You don’t want to take out another loan just for your down payment on top of your new mortgage that you’ll have to pay each month. This creates more opportunities to get overwhelmed by unnecessary debt.
Since buying a house comes with new expenses, you’ll want one less thing to worry about in your budget, so make the move to start saving intentionally, so whatever you’re aiming to spend on your down payment, you can pay in full when it’s time to purchase.
Pro Tip: If you want to set a savings goal or set aside money each month, check out our savings goal calculator to see how long it will take to reach your goal and how much you need to set aside each month to get there on time.
A key skill during the homebuying process is researching different mortgage rates. If you aren’t paying attention to the best rates, you could be losing out on saving money over time by having a higher rate compared to another lender.
Mortgage rates vary by lender, location, and borrower, and the rate is the interest you pay on your mortgage each month. Banks, credit unions, and online financial institutions all offer different rates, so you’ll want to research who you want to work with for your homebuying journey.
Whenever you’re looking at different neighborhoods or communities to live in, you must be aware of a very costly impact—flood zones. Flood zones are areas of land that are susceptible to flooding, whether it’s a lower elevation or close to a cresting river or creek.
As you narrow down your favorite houses, it is important to know which ones are in flood zones to help prevent unnecessary water damage or other related costs from future inclement weather. While severe weather can happen anywhere, it may be best to avoid houses in flood zones altogether to protect your home and your budget in the long run.
You can research flood maps online at FloodZoneMap.org or FEMA’s Flood Map Service Center to see if the house you’re interested in is in an area of concern.
Buying a house without an emergency fund is a risky way to approach homeownership. Emergency funds serve as the netting between you and significant financial strain because they are there to help you when unexpected expenses arise.
Instead of scrambling to find the money to cover a broken faucet or have your air conditioner replaced, you can pull from your emergency fund to cover the costs. This can help erase the worry about going over budget, or worse, taking out a loan and going into debt.
Ideally, you’ll want to have 3 to 6 months of living expenses saved in an emergency fund. If you’re starting from scratch, try to save at least $1,000 and start building from there.
Your mortgage isn’t the only thing you should be thinking about when trying to buy a house. Homeownership comes with plenty of other expenses, so it helps to be prepared.
Hidden expenses to watch for include home repairs like plumbing issues or electrical maintenance, replacing appliances like refrigerators or ovens, lawn care, property taxes, HOA fees, and homeowners' insurance. To discover more about these hidden costs, read our other blog, “The Hidden Costs of Owning a Home: What to Know Before You Buy.”
Q: Why is it important to get a home inspection?
A: Home inspections raise awareness of what safety concerns are present in the interior and exterior of a house. They could help you identify essential repairs, or even reveal major issues that could make you reconsider buying the home and choose a different one.
Q: What’s the difference between a buyer’s market and a seller’s market?
A: A buyer’s market is when the inventory of homes is high, making sellers more willing to adjust their prices. In a seller’s market, home inventory is lower, so buyers could struggle more to find a better deal on housing prices.
Q: Do I need to get pre-approved with a mortgage lender before buying a house?
A: While pre-approval isn’t legally required, it could make a difference in the way sellers see you compared to other homebuyers because they know you’ve already been vetted with a legitimate mortgage lender.
Q: Why is it important to research different mortgage rates before choosing a mortgage lender?
A: Researching helps you be aware of which team you want to work with, who offers better mortgage rates, and who you could likely save the most money with during the homebuying process.
Q: How do you know if the house you want to buy is in a flood zone?
A: To know if the home you’re interested in buying is in a flood zone, you can look it up on FloodZoneMap.org or FEMA’s Flood Map Service Center.
The homebuying journey can be full of questions, concerns, and dreams, and our Mortgage Champions are here in West Tennessee to navigate the road with you. Whether you’re ready to buy or just starting to look, reach out by booking an appointment or calling us at 731-664-1784.
For more learning opportunities about homebuying:
“What Makes Up a Mortgage Payment? 4 Things You Need to Know”
“The Hidden Costs of Owning a Home: What to Know Before You Buy”
Leaders Credit Union is federally insured by the NCUA and is an equal housing lender.