This short article summarizes The 7 Top Home-Buying Mistakes You Should Avoid – Forbes (by Kate Ashford).
1) Buying when planning to move again soon.
2) Buying more than the budget can support (see step 4).
3) On top of #2, forgetting about other ownership costs (not to mention costs of moving and making the new place “your own”).
4) Buying with a low down payment. If you can’t afford saving monthly for the down payment under the formula below*, then you should seriously consider staying where you are.
5) If it is not in writing, it isn’t part of the purchase.
6) Buying a home without your own inspection.
7) Going on a spending spree so everything else is new too (this really adds to your stress with additional debt – settle in first).
Mistakes #2, 3 and 4 above combined make for a real financial disaster later.
Step 1) Add up your current monthly housing expenses: PITI or rent + Utilities (Gas and/or Electric) + other monthly expenses specific to current housing situation (for example, homeowners association).
Step 3) Subtract the total $ in step 1 FROM step 2, in other words: $ Step 2 minus $ Step 1 = $ Difference.
Step 4) If Step 3 is a positive number#, then this is the amount you need to save monthly for your down payment. You see, Step 2 is how much living in the new place will cost you a month (by your own estimates – so estimate wisely and realistically). If you can’t afford to save the Step 3 amount, in addition to your housing today, you can’t afford to buy and live in the other housing. This calculator will help you determine when you will have saved the amount you need for your down payment.
#If Step 3 is a negative number, then the new place is less expensive … BUT, you still need to save for the down payment for the new place!