Wallet buster: Buying out of your league
As a general rule of real estate, the higher the listing price, the more impressive the home will be. So if you don't want to blow your budget, avoid looking at houses above your price range in the first place, says Patricia Pipkin, a Realtor in Santa Fe, N.M., and a regional vice president for the Chicago-based National Association of Realtors.
"The Realtor should not be showing them properties that are over and above what they can afford to buy," Pipkin says.
Buyers need to carefully evaluate their finances before they begin house hunting, and then be honest with their real estate agent about what their income, savings and credit affords them, she says.
That also means factoring in supplemental expenses such as taxes, insurance, repairs and homeowners association fees. Insurance and tax alone sometimes exceed the principal and interest of the loan, says Randy Lovitt, president of Century Title Inc., a title company in Metairie, La. "And expect that component of your payment to go up constantly over time. Insurance goes up, and taxes never go down," he says.