Very few people buy a home in the Bay Area with the belief that they could lose the property. Still, mistakes happen, and most of the reasons sellers decide to list their home are due to mistakes they made when they purchased it in the first place.
For example, a seller may place their home up for sale because they cannot stand freeway noises or live under a flight path. Of course, these sellers knew about the issue when they purchased the home, but they were probably swayed by a low price.
Avoid these mistakes when you buy a home in the Bay Area so you are not left trying to get rid of it down the road, or even losing it altogether.
1. Choosing the wrong agent
Not all real estate agents are the same! You should hire a buyer’s agent to represent you and protect your interests after interviewing several and comparing their experience. Above all else, do not make the mistake of assuming the listing agent of the home you want to buy in the Bay Area will look out for you, because they are under contract with the seller to get the best price.
2. Skipping the home inspection
Think it is easy to spot every potential defect with your own eyes? Think again. Home inspections are not just designed to point out obvious of minor problems but also potentially costly issues. Do you want to borrow hundreds of thousands on a home that has serious foundation issues that will cost more than $35,000 to fix? Do you want to deal with major roof issues before you have lived in the home for a year? Probably not, so make sure you get an inspection.
3. Going into debt after closing
A lot of new home owners make the decision to plunge into debt, usually to make major changes to their new home or to buy items they think they need, like a spa, a new deck or furniture. While you probably want everything to be perfect, it is not worth losing your home. If you need to pay for medical expenses, lose your job or suffer some other financial setback, you may end up defaulting on your mortgage in the Bay Area and going into foreclosure.
4. Forgetting other costs
When you buy a home in the Bay Area, you will not just replace your rent payment with a mortgage payment. You will also be responsible for maintaining the home, paying property taxes and insurance and covering utilities. Most people underestimate or completely forget about property taxes and insurance, which can easily add $100-200 to your mortgage payment.
5. Using all of your savings
Many sellers will scrape together every dollar they can into a down payment for their home in the Bay Area, or borrow money from family to pass the underwriting stage of the loan. Many are also facing ongoing money issues, using credit cards and cash advances to cover basic expenses.
Using all of your money just to buy the home puts you in a precarious position. You should have savings left over after your closing costs and down payment to cover any important expenses you may face after you move in.
During the housing boom, adjustable rate mortgages (ARMs) were wildly popular, and many of the buyers who opted for these loans ended up losing their homes when their interest rates reset and sent their monthly payments skyrocketing.
Do not assume that the mortgage with the lowest initial rate will be best for you, because you may end up with a payment you cannot afford down the road. The monthly payment should not be your only concern. Compare loan products and terms to decide which is best for you, and do not be afraid to get professional advice! This decision will affect you for a long time.
7. Choosing the most expensive home
You do not need to spend every bit of the money you were pre-approved to borrow. Remember that what the bank says you can borrow and what you feel comfortable borrowing may be two separate numbers. You should not feel under pressure to buy the largest, costliest home you can buy, because you will likely end up house poor and in a very precarious situation. In this case, losing your job, suffering an illness or needing to pay for important home or car repairs can put you on the path to foreclosure.
8. Changing your financial picture before you close
Many buyers have made the mistake of going out to buy a new car or running up a lot of credit card debt before they close on the home. This is a huge mistake! While your lender runs your credit and preapproves you for a loan so you can make a solid offer, they will also check your credit again before closing to make sure nothing has changed. If you get a new loan before the mortgage, your home loan application may be denied completely, leaving you at square one.
9. Buying a home when you plan to move soon
Some buyers are frustrated with paying rent checks and decide to buy their own home in the Bay Area — even knowing they will be relocating in a few years. This can be a big mistake, because you should never assume that you will have luck selling the home or renting it out when the time comes. The only time this makes sense is when you live in an area with a strong rental market, which allows you to easily rent the home out and cover the mortgage when you move.