5 Tips for Homebuyers to Help Avoid Financial Pitfalls
5 Tips for Homebuyers to Help Avoid Financial Pitfalls – Buying a home can be incredibly challenging when navigating the financial responsibilities. Newer homebuyers aren’t usually aware of all the costs involved with purchasing a new home. Fees like inspection fees, closing costs, property tax, mortgage insurance, homeowners insurance, HOA and condo fees, moving costs and maintenance. These additional costs aren’t necessarily hidden. Lenders must make sure you can afford your mortgage by adding up your monthly expenses including all the costs previously listed, and making sure it doesn’t exceed a proportion of your income. A good real estate agent will make you aware of these costs so you don’t make serious financial mistakes and aren’t disappointed. Here are 5 tips to help make sure you don’t make these financial mistakes when purchasing your first home.
- Focusing on distressed properties doesn’t necessarily mean it’s a good deal.
First time homebuyers sometimes explore foreclosures and short sales in hopes of a deal. If it’s for an investment property, then it can be a good deal. If it’s for yourself to live in, then distressed properties can take months to close and the money you may need to put into renovations may not be worth it. If you tune out the well-priced homes only looking at the low priced homes, you may miss out on some homes that had everything you want. Bargains are nice but not always worth it.
- You don’t necessarily need to borrow the full amount offered by your lender.
A good general rule of thumb is to borrow around 20% less than the amount offered by your lender. This will protect you financially. The amount offered is typically the highest value they are comfortable lending meaning you could barely end up affording the mortgage payments, and you don’t want to be nearly drowning all the time financially.
- Short-term adjustable-rate mortgages aren’t always advised.
Your monthly payments will be very high with a short-term mortgage. Is it worth the financial discomfort? Paying off your loan sooner relieving debt is nice, but the adjustable-rate means you will never know how much your mortgage payments will be. Longer-term fixed-rate mortgages is a safer bet. You’ll know your exact monthly payments making it easier to budget and although it may be 15-30 years, those payments don’t seem like that much after a couple decades since they will remain constant throughout – even with inflation.
- Don’t spend all of your cash to afford the home.
Make sure you are prepared for all the costs in closing a home including down payment, agent fees, appraisal fees, lawyer fees etc. Especially costs down the line like HOA fees, property taxes, etc. Keep these costs in mind while saving your money. The idea is to now empty your savings account your very first day as a homeowner, which would put you in a very uncomfortable situation.
- Research the Neighborhood before making your decision.
Make sure you know the neighborhood, as you don’t want to put all your money into a home only to discover you have terrible neighbors. As a first time home buyer you’re not in a good financial situation to get out of the home if you live next to a frat-like party house or next to annoying dogs that bark all night.
Buying a home for the first time is both thrilling and daunting. With so much on the line you want to make sure you do plenty of research and talk to your agent and lender to prevent any potential costly mistakes that may be difficult to deal with in the future.
Interested in purchasing a home in San Ramon? Call Rama Mehra today, the Top Agent in the area to get help from the best. (925) 415-0835
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