For most people, buying a home is one of the biggest decisions they’ll ever make. There’s so much to consider: What neighborhood should you choose? How much house do you want? And most importantly, what does your house need to make it feel like home?

Answering these questions can seem like a daunting task. The financial uncertainties related to home-buying only add to the overwhelmed feeling. Fortunately, you can avoid these critical mistakes to make sure you’re not overextending yourself financially.

Mistake No. 1: Outspending your budget

Before beginning the home-buying process, it’s crucial to know how much house you can truly afford. The general rule of thumb is to allocate 30 percent of your overall budget to home-related expenses. Those expenses go beyond your mortgage payment to include insurance, taxes, maintenance and utilities. That 30 percent target should also consider how much you plan to use for a down payment and closing costs.

Before beginning the home-buying process, it’s crucial to create a thorough budget that considers all recurring and one-time costs related to homeownership. Your budget can help you pinpoint how much house you can truly afford and which neighborhoods to target. It may also prevent you from overbuying and becoming cash-strapped later.

Mistake No. 2: Overlooking mortgage options

While you’re working on your budget, you should also seek out financing preapproval if you plan to take out a loan for your purchase. A loan officer can show you the total amount of a loan you’ll qualify for, how much you’ll pay in interest over the life of the loan, and the estimated amount of your monthly mortgage payments.

Unfortunately, too many home buyers jump at the first loan offer they receive without shopping around first. Competing lenders might offer lower interest rates or the opportunity for early loan payoff. If you’re considering a VA or FHA loan, have your lender compare the numbers against a traditional loan. Although VA and FHA loans typically require lower down payments, they could end up costing more in the long run because of mortgage insurance and interest.

Mistake No. 3: Working with the wrong agent

Your real estate agent should be working with your best interests in mind. Choose a qualified agent who has worked extensively with buyers. Your agent can help you find a house that fits your physical and financial needs. If an agent is consistently pushing you to max out or even go over your intended purchase price, it could be time to consider a different agent.

Mistake No. 4: Choosing wants over needs

Sure, that extra living space or oversized garage is nice to have, but is it necessary? It’s easy to get swept up in the home-buying process and forget that what you want might cost much more than what you need. Before you start looking, make two lists: one titled “must have” and the other titled “nice to have.” Refer to these lists frequently as you look for your future home.

Mistake No. 5: Skipping the due diligence

The key principle in home-buying is always get it in writing. An offer to purchase a home is a legally binding contract, and that contract should be as detailed as possible before you sign it. Maybe you love the appliances and want them to stay, or you’re hoping to keep the window coverings. If the seller agrees to these things, don’t rely on a verbal agreement or a handshake. Instead, have your requests written into the contract.

Mistake No. 6: Forgoing the home inspection

Waiving a home inspection can also be tempting, especially since the average inspection costs between $300 and $500. However, inspections frequently turn up potential problems home buyers can’t see, such as faulty wiring or termites. Spending that money now could prevent large expenses later.

As you embark on the home-buying process, a financial adviser can help create a budget and make sure you’re not buying more house than you can afford. They can also show you how buying a home might impact saving for emergencies or retirement. Taking the right steps to protect your money now could save you much more in the future.

David Mount is a director with the Wise Investor Group at Robert W. Baird & Co. in Reston, Va. Baird does not provide tax, legal or real estate advice and does not provide or service mortgages.

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