Buying your personal home is a great achievement. Being a homeowner gives you a feeling of joy and freedom, this feeling can't be expected from a rental home. Buying house for your living can be beneficial, too. The house you are purchasing is one of the most expensive assets you have ever bought.
However, this decision is not at all an easy one, you'll have to think wisely before moving forward or you will end up with losing your finances. Decision taken without knowing the proper facts may make you financially distressed. So, let's have a look of those small mistakes which you'd rather need to avoid.
1. Considering home-buying as a short-time investment
We buy homes for our living, and it should be the prime purpose. Homes are not always a way to invest your money and gain profits in future. You must understand the fact that a large asset like the house cannot always be a good investment. It is not mandatory that the value of a house will definitely increase. If you like a quick turnover of the money invested, suppose within 3 years, you might have to bear a big loss as you won't cover up the total cost from your sell price. Being a buyer, you must consider home buying as a long time venture. So, you must invest your funds in any other financial field where you can get a handsome return in short time frame, but not in buying homes.
2. Comparing rent with mortgage payment
If you are currently residing at a rented apartment and you are paying a good amount as rent, that doesn't mean you can afford the same amount as monthly mortgage payments. Practically if you calculate, you will find that you might afford much lower amount than your rent. There are several expenses apart from the sell price, these costs are also added with the process of purchase and buying a home. These are notably home inspection cost, escrow account deposit (if there is a PMI), HOA fees, property taxes, moving and transportation costs, maintenance bill etc. You might be aware of these costs, but you must calculate and know the exact amount before taking the next step.
3. Selecting a home similar or more than pre-approval
It is very important to get the pre-approval before shop for new home. After getting the approval number, try to select a less expensive home than your pre-approved amount. It is quite flexible for you to make future financial decisions if you choose a lower value home for buying. In future if any sudden need arises, it will be manageable for you as you'll have some funds in your pocket. You can't predict emergencies for which you may have to stop your huge monthly payments all of a sudden, and that situation would be much worse. So, invest your money on your future securities and use it in time of a real crisis like job loss, sudden accident etc.
4. No pre-planning
Plan your way to get the best deal in home loan. Before searching for a mortgage broker, first work on to clean your credit report from errors and others bad figures. It may take some time but it is worth to try. Manage your finances to control the debt-to-income ratio. Lenders are going to be very keen to check your DTI before saying the word “approved”.
As soon as your credit report becomes clean, look out for a mortgage broker and quickly apply for a pre-approval. Make sure not to go for any new credit card or loan by that time. If you do, it will affect your credit score or debt-to-income ratio negatively and your deal might get cancelled.
5. Taking late decisions
As per the current housing market, the opportunity for the buyers to get a cheap deal is quite high. It's a seller market where the prices are falling down day by day. So, if you are determined to get the best, take initiative now. According to the market stats, the inventory of the low priced homes are very low and the houses are selling on cash deals.
Go for the property which suit your needs as well as balancing your funds. Do not hesitate to let go the minor issues like old decoration, outdated paint, or old appliances for a better offer. Make your desired changes after getting the ownership.
6. Not shopping around for different mortgage brokers
Do not depend on a single broker. It's a open market so use it properly. Most of the problems occurred in home buying process are caused by misunderstanding of different associated matters. Talk to different broker to understand and explore the details of service fee, terms and costs.
The internet is the most convenient way to shop for good quality, cheap homes.There are many real estate websites and realtor blog where you can find your dream home. But do not always believe in the facts which are posted in those sites. Always consult a professional realtor and verify the facts given in the websites if you selected any home. A professional and experienced realtor can point out the pros and cons of your selection and also may choose the best option for you.