Buying a house may be the American Dream, but what mistakes do you need to avoid when buying your dream home?
In this episode of Destination Home, Rutenberg Realty agent and founder of BuyingNYC.com Brad Malow details how people can figure out if they can afford their dream home, and he addresses common mistakes homebuyers make in the process.
Related: How to Buy a Home for $15,000
He says stretching the budget is one of the biggest mistakes homebuyers can make. The financial crisis pretty clearly set the precedent for how well that works out (horribly!).
“If we look at what happened a few years back before the housing market crashed, people were taking short-term mortgages, buying dream homes, and ending up in foreclosure and losing their shirts,” Malow tells Destination Home.
Related: 4 Major Myths about the Housing Recovery
Home affordability is more complicated than most think, and Malow lays out what you need to consider in terms of your income, debt and lifestyle. He encourages people to remember that banks don’t ask how much you shop or vacation when you're applying for a mortgage.
If you’ve crunched the numbers and the affordability of owning versus renting is very close, this might be one instance where Malow would give you the green light to stretch your budget and buy — but only stretch a little. Check out the video to hear his advice.
Related: Build a House in 30 Days for 300K Less
Another common mistake for those in their 20s and 30s is busting the budget to buy a starter home, thinking you have not yet reached your peak earning potential. According to Malow, do not assume your income will increase in the future. In fact, when calculating affordability you should base your math on your lowest annual salary.
Yet another mistake he sees this demographic of buyers make is pouring money into renovations. Wait, don’t you want to improve your home's value? Maybe not as much as you’d think. Check out the video to find out why and learn when it's a good time to invest in turning your fixer-upper into your dream home.
Related: Five “Passé” Home Trends Make a Major Comeback
- Real Estate