A home is likely the single biggest purchase you’ll ever make.
Unfortunately, plenty of people make dumb mistakes when buying a home — errors that can cost you tens of thousands of dollars in extra interest, or saddle you with a home you can’t afford or unload.
Following are seven examples of dumb moves homebuyers make year after year. Read on so you can avoid them.
Dumb move No. 1: Ignoring your credit score
Your credit score can make or break your mortgage interest rate.
Lenders save their best interest rates for homebuyers with top credit scores. They know that people with great scores will almost certainly pay off their home loan in full.
Meanwhile, if your credit score is low, lenders get nervous that you’re going to bail. If they give you a loan, they will generally charge you more for it in the form of a higher interest rate.
If you test out Money Talks News’ free mortgage search tool, you can get an idea of what interest rates lenders would actually offer you right now based on your current credit score.
Don’t make the mistake of ignoring your credit score before house shopping. If it’s stuck in the basement, boost your credit score fast so you can borrow at a more favorable rate.
Dumb move No. 2: Not getting preapproved for a home loan
Getting preapproved for a mortgage isn’t the same as being prequalified, although some people use the terms interchangeably.
The preapproval process entails a lender thoroughly examining your financial situation, including pulling your credit report. As a result, the lender can give you a figure for the amount of money you can borrow. The prequalification process, on the other hand, is simply based on the data that the consumer provides.
Another bonus of preapproval: It can give you an edge if multiple people are placing offers on the same property.
Dumb move No. 3: Falling for the wrong type of loan
Be realistic about what you can actually afford versus what the bank says you can afford. Borrowing up to the bank-approved limit may stretch your finances and set you up for a major catastrophe in the event of a job loss or injury.
Also, be wary of falling into the trap of agreeing to a risky loan, like an adjustable-rate or interest-only mortgage. For some people, these loans make sense. But borrowers must beware that although these loans might start out with low payments, the interest rate is liable to adjust later on, taking your payments skyward.
A fixed-rate mortgage, on the other hand, gives you security and peace of mind.
Dumb move No. 4: Going without an agent
For most people, it’s a mistake to go it alone through the homebuying process.
A good agent can direct you to hot properties entering the market, connect you to competent lenders and inspectors, and generally smooth out any bumps that may arise.
This isn’t the time to be nice and use your brother’s friend’s uncle as a favor. You’re making a major purchase, and you want a proven professional to walk with you through the process.
If you really can’t bear to pay a commission to an agent, at least get a real estate lawyer to help draw up your offer and look over paperwork before you sign on the dotted line.