Valuable home-buying tips

When you buy a home, it’s likely your biggest purchase ever, and mistakes can be costly. Here are some tips:

Aim to have as high a credit score as possible, because lenders offer the best interest rates to those with the highest scores. You might even spend a year paying off debt and paying bills on time in order to boost your score before you apply for a loan. Check your credit records annually for free via AnnualCreditReport.com, and fix any errors in your reports.

Don’t get the wrong kind of mortgage. There are many different kinds of mortgages — fixed-rate or adjustable-rate, 15-year or 30-year terms, and so on, with interest rates varying widely. Read up on home loans and choose the kind that will serve you best, as one not wellsuited to your needs can cost you tens of thousands of dollars more.

Don’t buy more home than you can afford. A bigger home may be more appealing, but you don’t want mortgage installments to be hard to pay. With little wiggle room, a big unexpected expense or a job loss can be devastating. When planning your purchase, remember taxes, insurance, maintenance and closing costs, as well as your down payment. Focus only on homes you can really afford, and live below your means so you can sock away money for retirement.

Finally, don’t think of your home as a great way to build wealth. Some homes will turn out to be great investments, but on average, homeprice appreciation significantly lags returns from stocks and other alternatives. Some homes even lose value. Buy a home to live in, and know that real estate markets can be fickle, especially in the short run. According to Yale economist and Nobel Prize winner Robert Shiller, home prices fluctuated from 1890 to the mid-1990s, but overall, adjusted for inflation, they didn’t appreciate much. In general, homes are not the best paths to wealth.

We all make mistakes, but the fewer you make, the better off you’ll be — and the more you can save.