How to Avoid Home Buying Mistakes
For most of us, buying a home is a huge deal. However, choosing the wrong investment property can affect not only in our wallet, but also in our welfare. One of the most horrifying effects on investing in a wrong property is one can be drowned in a mountain of debt. For you to make a surefire decision in whether to invest or not, here are some great points to avoid any rookie mistakes in buying your dream investment.
Don’t deal with Cost to Own
Down payment and monthly mortgage payment are usually a homebuyer’s main focus when he is ready to buy his home property. A home buyer often forget about closing costs, which is 5% in total of the home property. Before the closing date, a home buyer should obtain an estimated cost of property taxes, appraisal fees, legal fees and homeowners’ insurance. The costs of homeownership for example are maintenance and repairs, utility bills, insurance and property taxes. Thus, before buying a home property, a buyer should ensure that he plans ahead of time, allocate money in fulfilling these obligations and absolutely have a fully funded emergency fund to a surefire way not to be financially in arrears.
More often than not, homeowners live in their house an average of just 5 years. You may not realize the resale value of your house when you move in or it may not seem important for now but in just a matter of years it will possibly become immensely important. You can seek advice from a real estate agent who fairly knows well the area. A good real estate agent in Melbourne can give you advice which homes captivate most attention from the home buyers and the neighborhood in which home values are increasing. For you to choose better, you can narrow down your choices by using your real estate agent’s recommendation.
Check Credit report
Before a home buyer begins his house hunt he should ensure that he has a copy of his credit report. If you want a higher credit score you must have clean credit report. The cleaner and higher credit score is the more likely you will be preapproved at a low interest rate for a mortgage. Before a mortgage lender review your credit you must make sure that you already reviewed your credit report to avoid unavoidable disagreement.
Make sure to have it Inspected
A house may look like it’s in firm shape, however you should not be foolish not to have it thoroughly inspected by a professional. An inspection is worth any penny. Some home buyers think that inspection and appraisal are the same but little did they know that it’s not. An inspector is the one who spot the things that you are incapable to see, like if the house has sturdy walls or if those tiny cracks that you see in the foundation are something to be concerned of. An inspector will look for signs of any damages like water damage or any damage in your electrical system. A home buyer can negotiate with the seller to decrease the price. So before you buy a house, you can ask suggestions from your friends who’ve purchased a house or you can get recommendations from your real estate agent.
If you are relocating soon, you should not buy a house
For renters it can be irritating to write rent check every month and knowing that at the end of the year you have no home equity. If you are not sure that you’re going to live in a house for a few years, it’s no doubt that it’s not yet the right time to buy – equity or no equity. Some people purchase a house even though they know that they’re going to relocate after few years. In other words, don’t purchase a home property and automatically become a landlord or a seller when you move. So if you’re not living in a place with a stable rental market then stay as a renter for now. Living in an area with stable rental market will give you the advantage to cover the mortgage on your house if you’re relocating somewhere.
Small down payment is not good
Lenders have strict requirements to enable a home buyer to qualify for a mortgage. But still, it is possible to purchase a house with a little 5% or lower down payment. Though it’s not bad thing, but it can become a disadvantage. It means that a home buyer will have a very small equity to his or her house when he or she moves in. If you decide that you’re going to relocate and have to sell the house then you’ll end up owing more than what you’ll be able to get from the sale when you factor in closing costs. So this will put you in a risky situation. Though there’s a slim chance that this will happen, still you’ll have to pay private mortgage insurance or PMI monthly until your home equity transcends the 20% mark which will make you pay for years. Therefore, if the down payment is lower than 20%, then you are or your loan is technically in a risky situation. Make sure that the down payment of a home property is not lower than 20%. The interest rates may be low but if it will make you borrow thousands of money then it’s not worth the risk at all. So saving money in a year or two for a down payment will help you avoid years of paying private mortgage insurance or PMI.
Buying a home is a huge purchase. So it’s a great advantage if a home buyer knows what to look for and what’s to avoid. You don’t want to end up regretting the chance to live in your dream house but have to pay thousands more to fix huge damages. Therefore, a home buyer especially a rookie home buyer can follow the tips mentioned above to avoid mistakes in buying a home.