Your house is likely the largest purchase you will make during your lifetime. Therefore, you want the money to go towards a solid investment which will increase in value as the years go by. However, there are many details involved in buying a home that the average person does not think about. Consult the following five tips in order to avoid common buyer mistakes that cause problems well beyond the initial purchase.
1. Don’t Buy If You Are Moving
It is no fun for renters to watch their rent check go into their landlord’s bank account each month instead of going towards equity in a home. That having been said, it is not a wise decision to buy a house if you are fairly certain you will be moving shortly after the purchase. There is no guarantee you will be able to sell when you need to move. If the property stays on the market for a long time, it could hurt you financially. Think into the foreseeable future before buying.
2. Avoid Nominal Down Payments
In recent years, lenders have been tightening the qualification requirements to get a mortgage. In some cases, a three percent down payment is still enough to buy a house. While a small down payment may seem appealing on the surface, it also has a major pitfall that could end up crippling you financially. If you are forced to sell the home after only living in it for a short time, the closing costs for the sale will often be more than the equity you have accumulated. Therefore, you will end up owing money. Even if you stay in the house, you will be forced to pay private mortgage insurance each month until you have reached the 20 percent equity mark, which could potentially take several years. This is because home loans with less than 20 percent down are considered a risk. If you end up defaulting on your mortgage, private mortgage insurance protects the bank.
3. Always Have Everything in Writing
Before you sign any contracts regarding the purchase of a home, make sure that all the items you were told are going to be staying are clearly listed on the contract. If they are not listed, have them added in writing, otherwise you have no claim.
4. Never Skip the Inspection
Even if the house looks fine, never assume that everything is as it seems. Having a professional thoroughly inspect a house before you purchase it can potentially save you thousands of dollars in repair costs down the road.
5. Be Ready for Added Costs
Along with the mortgage payment, there are also property taxes, utilities and maintenance costs to be considered. Be sure to factor these into your budget before you buy a home.
Buying a home can is a dream come true for most people. However, if the proper precautions are not taken, that dream can quickly turn into a nightmare. Following these tips can help your home buying experience go smoothly.