No matter what the condition of the housing market, purchasing a home is a major commitment and a vital financial decision. A home is much more than a financial investment; it is an investment in a new lifestyle and a new way of looking at property. Those who are unprepared to make the leap from renting to home ownership can make some costly mistakes, and learning to avoid those blunders is vital.
Think With Your Head Not Your Heart – One of the most common mistakes made by first time home buyers is allowing emotion to rule the day. Although buying a home can be an emotional process, there are some things home buyers can do to prevent emotional ties from getting in the way of sound financial discipline.
While it is all too easy to picture your family relaxing in the backyard of a new home, take a step back and look at the home with the eyes of an investor. Pretend for a moment that you are not going to live in the house but are buying it as a pure investment. Is it still just as attractive, or has it lost some of its appeal? Emotional attachment is fine, but it should not overrule your good judgment.
Consider All the Costs of Home Ownership – Buying more house than they can afford is a classic blunder for many first time homeowners. One of the chief culprits behind this error is factoring in only the cost of the mortgage versus the cost of continuing to rent. While it is certainly appealing to go from collecting rent receipts to building up home equity, keep in mind that the costs of owning a home do not end with the monthly mortgage check.
Don’t Try to Time the Market – Market timing doesn’t work in the stock market, and it doesn’t work in the home market either. Although it can be tempting to try to wait for the market to hit rock bottom, you may be left out in the cold when the market starts to turn around. Many professionals, including home builders, lenders and real estate investors, have a great deal of difficulty timing the market, even with all their specialized knowledge and experience.
While some home buyers will be lucky enough to sell their existing homes at the top of the market and buy their next one when the market craters, most of us will not be so lucky. There are bargains to be found in every real estate market; the key is to arm yourself with as much information as possible and shop smart.