8 Home Buying Blunders

1. Not doing your homework. Educate yourself as much as possible before you even begin working with an agent. Start searching online to get a sense of the areas you are interested in and familiarize yourself with their price points. There are many free real estate search engines online, such as Trulia, Roost, and Zillow.

Also consider what type of loan suits you. The standard, "safe" choice is a 30-year fixed-rate mortgage. If you know you will be in the home for the long haul, a 30-year fixed mortgage ensures stable payments for the life of your loan. Be vigilant about adjustable-rate mortgages, or ARMs. These have dominated housing crisis headlines for their extremely low "teaser" rates that can balloon after a few years, massively increasing payments. There are different types of ARMs, some of which are sneakier than others. The initial period of low interest rates varies, but is usually five or seven years. Some have a set schedule of rate increases. Even with all that has ensued since the end of 2007, many lenders are still pushing ARMs. ARMs can make sense if you're planning to move within five years and you are sure you can cover higher interest rates in a worst-case scenario (such as not being able to sell). You should not use ARMs to stretch for a bigger loan, however. If you can't afford the house without an ARM, you can't afford the house. Stay on guard and do not let your lender or agent talk you into an adjustable rate mortgage if it's not really right for you.

2. Using the seller's agent. It is the job of the seller's agent to fetch the highest possible price while making few concessions. They are directly compensated for bringing in higher prices, as they are typically paid a percentage of the selling price, usually 5%-7%. Get your own agent. Interview several before picking one. Buyers' agents usually still get paid a percentage of the purchase price (keep that in mind if they suggest you can afford a more expensive home), so they will still have an interest in you paying more, but they also have a stake in making you happy, as their future business depends on referrals. Another option is to find an exclusive buyer agent who charges a flat rate, but then you would be responsible for an up-front payment, rather than your agent's pay coming out of the purchase price.

3. Visiting open houses before you choose an agent. Surprisingly, the agent at the open house may have a claim to you (and the commission if you buy that property) because he or she was the first agent who showed you the home. If you find the property of your dreams at an open house before you find an agent, you risk being locked into working with someone who does not have your interests at heart. Most agents probably wouldn't go through with trying to claim your commission if you found an agent afterward, but don't open yourself up to the possibility. Similarly, don't have agents you are interviewing show you a slew of houses--if you decide not to go with that agent, you may face complications if you make an offer on one of those properties with another agent.

4. Relying too much on your agent. If you have concerns, speak up. Do not assume your agent will catch everything. Stay involved each step of the way and make sure you understand the ramifications of each decision.  

5. Becoming emotionally attached to a particular property. It's difficult to separate yourself from a property, but you'll maintain your composure and leverage for negotiations if you try not to think of it as your new home (yet).

6. Allowing surface issues to sway your opinion. Ignore bad decorating, such as paint color, and try to look past the current owner's furniture and aesthetic. Similarly, don't allow stylish upgrades such as stainless appliances and granite counters to trick you into thinking a property is structurally sound.

7. Leaving important contingencies out of the contract. Make sure you include stipulations for finding financing and passing an inspection. Also demand a final walk-through 24 hours before closing.

8. Making inopportune extra mortgage payments. Don't pre-pay your mortgage before maximizing your 401(k) match or paying off credit card debt--both typically offer a higher return. The urge to pay off your home as quickly as possible is understandable, but contribute at least enough to your 401(k) to take advantage of your company's full match first. Paying off credit card debt should also come before paying extra on your mortgage, as credit card interest rates are typically much higher than interest on your loan.