Buying A House? Avoid These Mistakes At All Cost
Many people cherish the fond ambition of owning a place they could call their own. For some, it remains the biggest investment of their lives. For others, it serves as the quintessential symbol of achievement. The process of finding that dream house is not simple by any means. Initially, people need to expend a lot of effort and time to find that perfect house in the perfect neighborhood. Then, they need to consider any remodeling projects that they might want to take up. Once they’re satisfied with the house, they review the finances and the paperwork. After closing the sale, they begin the long-drawn processes of settling down in their new house as well as repaying the loan.
Why Homebuyers Usually Err When Buying a House
A home is not just a home. It also represents a long-term financial investment and a commitment. Unfortunately, however, many homebuyers head into the activity with no idea of the time and effort they need to invest. From searching for the best deals to reviewing the paperwork, they need to examine every detail minutely. However, they tread with haste rather than caution. Thus, they often end up ignoring the very facts they need to heed. This is why their dream project turns into a financial nightmare very quickly.
First time homebuyers usually make the mistake of taking things lightly. Newlywed couples, for instance, venture into the real estate market with dreamy eyes and romantic notions. Some of them feel that buying a house would be much easier after taking the biggest plunge of their lives. This makes them oblivious to the fine print associated with their dream house. As a result, they end up experiencing several problems, which they could have avoided.
Similarly, renters grumble about wasting their money on a property that they don’t own. This makes them feel that buying their own home would be a more cost-effective proposition. As a result, they often end up purchasing one of the first houses they come across. Even professionals – who might otherwise be financially savvy, commit some elementary errors.
Top Things to Avoid When Buying that Dream Home You’ve Got Your Eye On
Being aware of the pitfalls to avoid when buying a house could be worthwhile. It could make the difference between taking on a humongous burden of debt and building financial security. Here is a list of blunders to avoid, when you decide to buy your first (or next) home.
- Not Taking the Time to Understand Housing Market Trends: If you’re keen on purchasing a house, you need to do your homework properly. That includes understanding housing market trends. Variances in supply and demand cause fluctuations in the housing market. At times, it becomes a seller’s market (conducive to those looking to sell houses). On other occasions, it becomes a buyer’s market and favors those looking to buy houses. The prevailing economic conditions, consumer confidence levels, and interest rates also influence the housing market. Therefore, consider reading various newspapers, magazines, and websites that pertain to the real estate sector. This would give you significant insights into the current state of the market.
- Not Having a Budget: As mentioned earlier, buying a property is a long-term financial commitment. If you take a home loan, you would also need to pay a monthly mortgage. This would be over and above your current expenses. Not having a budget could lead to your making incorrect assumptions about what you can afford. Therefore, make a budget that enlists all sources of income and all expenses. At all costs, avoid maxing out your spending power as you might require cash for other purposes later. It would also be worthwhile to ensure that all your paperwork is in order at this stage.
- Not Checking Your Credit Score: The companies you make payments to report your payment details to credit bureaus such as Experian, Equifax, and the Trans Union. These credit bureaus compile your credit report. Your credit report contains the details of your past financial history, including your timeliness in making payments, the kind of accounts you have and when you opened them. It also contains your credit score. Your credit score is a three-digit number, which ranges from 300 to 850. Lenders refer to this score for evaluating your creditworthiness. Each time you require new lines of credit i.e. a home loan, the lender checks your credit score from these bureaus. Based on your credit score, the lender would decide:
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- Whether to extend credit to you or not and,
- The terms on which to extend credit to you
If your credit score is below par, the lender could either reject your application for credit or alternatively, they could offer you credit at steep interest rates.
- Not Getting a Preapproved Home Loan: Several homebuyers find out their credit scores. Then, they wait until they find the house they want before they think about the loan. However, property sellers prefer to avoid additional time delays and hassles by prioritizing buyers, who have pre-approved loans. They do so because buyers, who apply for a loan after making a bid, might not get the desired amount of financing they required. Therefore, having a preapproved loan enhances the value of your bid in the eyes of the seller.
- Neglecting the Value of a Home Inspection: Sellers and brokers associated with sellers often highlight the positive aspects of the property. At the same time, they also downplay the negative ones. Therefore, avoid taking their words at face value. Instead, consider engaging professionals in carrying out an inspection of the property. From structural issues to plumbing problems, these inspectors would help you identify the additional money you would need to spend on repairing the property. Their advice could help you secure a more advantageous deal.
- Neglecting the Hidden Costs: Homebuyers often make the mistake of neglecting minor costs associated with the house. Therefore, they don’t look beyond their loan amount and their monthly mortgage payment. By doing so, they forget several minor expenses that could add up to several thousands of dollars. These could include:
- Appraisal Fee
- Credit Report Fee
- Notary Fee
- Escrow Fee
- Homeowner’s Insurance and,
- Property Taxes
- Ignoring the Resale Value of the House You Want to Buy: When you’re buying a house, you would not think of putting it up for sale. However, life comprises various unexpected events and changes e.g. job transfers, illnesses etc. These changes could make you put your house up for sale. Therefore, you need to consider whether:
- You would find it easy to sell your house later and,
- You would receive a good sum toward the house, which you could use for purchasing another one
- Trusting Verbal Agreements: Homebuyers often experience situations where they do all the hard work to convince sellers into accepting their bid. However, a day or two later, they find that another party has offered a better deal, thereby making the seller go back on the agreement. To avoid this, never accept verbal deals or agreements as final. Verbal agreements are not binding. Therefore, always ensure that you secure property agreements in writing to safeguard your interests. In addition, ensure that you go through the fine print to understand the contract or agreement thoroughly.
As mentioned earlier, a home is not something you would purchase several times in your life. Hence, it becomes imperative that you get everything right the first time. By knowing the pitfalls you need to avoid, you could ensure that you begin your association with your new house on the right foot.
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