All geared up for your new home? You’re white-picket fence dream has come true. You’re anxious to move into your new home and are surmounted by a whirlwind of emotions, primarily happiness. But you must be cautious and smart. One mistake is all it will take for your new home buying experience to become a financial nightmare.
Recent college graduates may consider owning a home a quintessential symbol of achievement and may not look into the details. Newlyweds may overlook the nitty gritties of home buying. After taking a deep dive into marriage, these lovebirds are likely to think that other major decisions like purchasing a home will be a cakewalk. Even 30-something professionals, who may have excellent financial knowhow still make novice mistakes.
Arm yourself with these tips to avoid making 10 of the most costly mistakes that could put a hold on the ‘SOLD’ sign outside your new home.
Spending more than you can afford
Set a realistic limit on your home buying adventures. Create a budget and determine how much of your new home can you really afford. It’s simple. Make a list of all your monthly expenses – rent, loan payments, groceries, insurance payments, etc. Subtract this from you’re your monthly take home pay. The result is the amount you can spend on your new home every month. Don’t look at homes outside your price range. Stretching beyond your financial means will put you in a dangerous spot. The rule of thumb permits you to devote only a third of your income towards housing expenses, which include rent, interest and other outgoings. It is very important that you set your borrowing limit before taking the plunge.
Failing to qualify for mortgage or loan
You book a flat and decide to pay the initial deposit with your savings and you rely on the bank for the rest. To your dismay, the bank turns down your loan request. Hence, it is always better to explore all your home loan options before signing on the dotted line. These days you don’t have to rely on maintaining a huge savings deposit in order to avail a loan from your bank. Banks and other financial institutions are making loans readily available for borrowers. Get a pre-approved home loan. A pre-approved home loan will ensure that you don’t face last minute hiccups at the time of actual approval. When pre-approving a loan, the bank looks at your repaying capacity and accordingly fixes the loan amount. This way you can know your upper limit and can look for a house within this amount.
Look out for added costs
Buying a home is not only about replacing your rentals with loan EMIs. You will also have to incur stamp duty, property taxes, maintenance expenses, repairs, commission to brokers and utilities. Check with the seller, your broker and to be neighbours what are their monthly expenses like. Factor in all costs and try and estimate what your total expenses would be. This will help you decide if you can afford the type or size of home that you desire, if you need to work on increasing your income or if you need to further curb your monthly expenses.
Get everything in writing
As a buyer you will expect light, shower and bath fixtures, ceiling fans, washers, dyers and other appliances only to discover an appliance free house and that the seller has even taken the drapes down. Go through your contract with a fine tuned comb. Consult your lawyer and broker before signing on the agreement. Ensure that everything from painting to even the door bell is in writing.
Take inspection seriously
You are excited and emotional about your new purchase but you will have to keep your emotions in check until you have a clear picture of the home’s physical condition. You will have to check what kind of shape the house is in before you close the sale. Although the house might appear to be alluring, it would be foolish not to get it professionally inspected. For all you know you might end up spending profusely on hidden defects. Look for signs of water leakage, cracks, etc. If there are conditions that will need repair, you may be able to negotiate with the seller to drop the price and the inspection will be worth every penny.
Choose the right agent
Choosing the right agent will not only affect the price but also the entire experience of purchasing a property. The right agent can make buying your dream home a soothing experience but a wrong agent can leave you with an egg on your face and all your aspirations will be washed away. If you’re not confident of your agent get a second opinion. Get recommendations from friends and relatives. Ask questions and interview two to three agents to decide the best fit for you.
Buying a home may be the largest purchase you might ever make. But it need not be the most difficult.