We have all made purchases in our life that we regret. Whether its the new and improved product on the market or the temptation of buying from an info commercial we are all guilty. Normally these purchases do not break the bank and we can get over them.
But what if you purchased a large ticket item only to discover you cannot afford it. It happens BUT it can be avoided if only you do some research first.
The home buying process will generate certain expenses that cannot be avoided and should be factored into your budget. There is a lot on the line when you are looking to purchase a home and being prepared will help alleviate the stress and possible financial mistakes that can and could be made. Be prepared and avoid these common mistakes that could cost you a lot in the long run.
1 Getting Emotionally Involved
Buying a home will be the most expensive purchase you are going to make. Your emotions will come into play. You need to attack this like a business transaction. Make sure you write a list of what you want in a home. What is the most important things you require in this home. What can you live without. Write them down. Put them in lists of what will make or break you moving forward. Remember there will be other homes if you lose the house you want.
Take your list and investigate a variety of homes you want to go see. Take notes and compare before moving forward.
2 Finding the home yourself
We all know there are a variety of web sites and ways to seek out a home purchase. People are selling homes privately and with various different companies/web sites. Do not tackle this yourself. You need to use a professional real estate agent. They have the information and experience you need to ensure you are making the right decision. They can narrower down your search quicker and more efficiently. They normally have possible sales that are not even on the market yet and have access to exclusive listings. They are also able to help in the negotiations and will help avoid in possible legal implications of going at it yourself.
Like anything though make sure you research the real estate agent also. Ask for recommendations and interview them. Going this route will save you a lot of time and stress. Remember they are there for you so take advantage of this. Using this service to purchase a home normally does not cost you anything.
3 Going to the listing agent direct
Remember the listing agent is working for the seller so avoid this if at all possible. Unless you know and have used this agent in the past it is best to avoid this at all costs. Now the agent you decide on may have a home they have listed that fits your criteria. Make sure this is not the only homes they are showing you.
4 Thinking you have no rules to follow as a homeowner
When you rent you have certain rules you may have to follow. As a homeowner there could be certain rules that apply to a property you are looking to purchase. There could be deed restrictions or subdivision rules you have to abide by. For example you may not be able to put up a clothes line or build a shed. Any renovations may need the approval of the area or city. If in a condo you may not be able to have pets. You need to ensure and ask if there are any restrictions/rules when purchasing the property. The last thing you want is too find out this information after you are moved in.
5 Not saving enough money
Having the down payment is only 1 part of the equation. You need to factor in things like closing costs as well as other costs that could arise. What about some quick upgrades like painting and cleaning. You may have ideas on updating the landscaping etc. There are also added items you may need. Furniture, electronics, lawn mower, snow blowers etc. You need to ensure you have a slush fund for these items.
6 Not getting pre approved for a mortgage
In today’s world you can use web sites to see what you qualify for. This is fine but you need to use a professional to ensure you are in the right range and know all the ins and outs. These sites/calculators are normally fairly vague. Each lender has different criteria on how they qualify clients and a mortgage broker has access to a variety of lenders so they can improve your chance of an approval and normally at a better interest rate. They will also check your credit, income and assets to ensure the lender is willing to approve based on your situation. They will also save you time as they will give you a maximum price range to look at. Why look at homes in the 300k range when you only qualify for a 200k home. Do not set your self up for disappointment.
7 Not checking the prices on homeowners insurance
Location is the main factor here. Find out if the home is possible in a flood zone area or even an earth quake area. Will it cost more if by the water. This mistake alone could cost you a lot of money. So call your insurance agent to get some information to avoid any surprises.
8 Not checking your credit score
If you have gone through a mortgage broker they would have pulled your credit report and explain any issues that could arise. The best thing in today’s world is to check your own credit score at least once a year. This is a minimal costs and will save you in the long run. If there are issues on the bureau then you can address and fix them. While you can still get a mortgage with credit issues you will pay a higher interest rate and will be required to put more money down on the property. So instead of only need 10k on a 200k purchase you may be required to put 40-50k down and your interest rate will be 2-3% higher than if you had great credit.
9 Not getting a home inspection done
This is a big purchase so make sure you get an inspection done even if home is brand new. Do not be afraid to ask questions and if any issues you have the option to re-negotiate your offer. You need to know if the property has any problems that could potentially cost you a lot of money down the road. Again its best to address now before you own the property.
So be prepared and educated. While you may be pushed to act quickly make sure you are comfortable first. As stated previously there are other homes on the market that will match what you want. Do not let one home put you in the poor house. Do not become an owner of a money pit so do your homework.
Eric Gall is the owner of Avanti Mortgages (operating as a mortgage specialist for TMG – The Mortgage Group Atlantic). If you are purchasing, refinancing or renewing your mortgage contact Eric or check out his website and apply online. If you are a First Time Homebuyer then get your free report here. If selling/refinancing a home get your free report here to avoid some common mistakes.