Unfortunately, in today's world, many people make several dumb moves while buying their new home. These are such mistakes which may cost you thousands of dollars for bearing additional interest payments or you may get stuck to a house which you may not afford easily.
Here goes some of the dumb moves which homebuyers make many times :
1. Credit score ignorance
Your loan interest rate might depend on your credit score. Lenders will offer the best interest rate to that person who has the highest credit score. They know very well that a person with high credit score will never be default on his payments and will surely pay off the entire loan in full.
For an example, if your credit score is somewhere near 600 or lower, a lender will get nervous because he might think that you might get defaulted on the loan. Though he will provide you the loan, the lender will also push you for a higher interest rate. It is because the lender will be trying to get as much interest as possible before you became bankrupt or financially poor.
It is wise to not ignore your credit score before shopping for a loan. If your credit score is below average, make a strategy to raise your score as soon as possible.
2. Not being pre-approved
Being pre-qualified is not same as being pre-approved. But sometimes, people to consider both the terms in equal meaning.
A lender will pre-approve your loan and provide you an accurate number which you can use as a parameter while hunting your new home. It will also provide you an edge in multiple competitive offers and deals.
Be real, do not borrow from the full amount of your pre-approved limit. It is advised that you must cut down at least 10% from the lender-approved amount and quote only that amount as your home buying budget while house hunting.
3. Obtaining an expensive loan
When you start dealing with a lender, be very careful. The lender might give you a lucrative but risky offer to avail. Brokers and banks have a tendency to push their customers towards adjustable-rate mortgage or simply to the interest-only loans. By these means they will lure people to purchase a house beyond their capability to afford.
These kinds of loans initially come with low interest rates. But after 5 or 6 years the interest rate (adjustable) might grow higher and similarly your monthly payments will also become bigger. The broker might assure you by telling you the solution, that is to sell the house after 5 years or you can go for a refinance option.
Every time that trick won’t work out. Most of the time, the person who opted for sub-prime mortgages suffered from home value disintegration. As they became underwater, they couldn't choose refinance plans or even sell the house. The deal was ended up at a foreclosure notice.
So, it is best to go for a fixed-rate mortgage loan option, you can manage your finances as well as can keep your home intact. Say no to the risky lucrative sales pitches and keep your toes on the ground.
4. Bad selection of agents
It will be a bad decision if you want to go for your house hunt all by yourself. It is wise to hire a good, professional real estate agent to accompany you in your quest.
A good agent can locate and inform you directly about the fresh new properties available in the real estate market. He can connect you with some competent lenders and inspectors, which will ease up any difficulties that may arise. Stop taking amateur advices from any un-professional person. You're going to make a huge investment, so you must depend upon a proven professional to go through the process.
If you are unable to afford a professional agent, at least get advice from a real estate lawyer. He can draw up your offer, verify the legal documents before you sign the deal.
5. Being emotionally fool
People often go over their estimated budget if they find out a suitable, beautiful house. Or, they might often ignore all the extra costs which come later. Though the house remains under your estimated cost but later a huge burden of debt may fall upon you. The debt might be generated through some extra costs, like old pool maintenance cost, lawn maintenance or repairing an old car. A homeowner’s association may charge you annual fees which will put enough pressure on your pocket.
Before purchasing a certain house, you must consider below given questions, it might help you to justify your home buying :
- Can you afford this house comfortably?
- Can you handle tax burdens comfortably on this house?
- Can you comfortably bear the maintenance, cooling and heating costs of this house?
- Can you comfortably pay for renovation works if required?
- How long do you plan to live in this house?
- Is there any issues which can hamper the resale value of this house ?
- Do the rooms, layouts and fixtures are suitable for your family?
6. Avoiding the inspection
Being emotional about the house sometimes may cost you a lot. Do not try to skip the home inspection process for your own good.
Whether you are buying a new home or an old historic one, you’ll require a thorough inspection before the deal gets finalized. Don't only rely on your vision. You'll require professional views to point out possible safety threats, code violations, and structural damage. To get the most detailed report from the inspection, try to keep your pace with the inspector while he is inspecting the house. The inspector will recognize the problem and suggest you whether the house is suitable for you or not.
An inspection can delay your home buying process. But it is very necessary for every home buyer as it will protect you from upcoming dangers associated with the property.
Last but not the least, always be ready with a backup plan. It might happen that after inspection you’ll find that the roof beams are too weak or the flooring is about to expire. What would be your next step? Your backup plan will help you to shift to the alternate step if the house doesn't meet your expectations and specially if you are trying for additional funding.