From closing costs to down payments to home appraisal, there are a number of confusing things about the home buying process, especially when it comes to finances. Make sure that you are not going to wipe out your savings when you purchase your first home. Educate yourself, avoid the most common mistakes that homebuyers make and save a ton of money in the process.
- Choosing a Risky Loan
You should talk with a mortgage broker or loan officer to learn about different types of loan products and choose the best mortgage loan for your personal situation. Make sure that you educate yourself as much as possible about the various loan products to increase your chances of choosing the best and least expensive loan for you. Determine whether a 15-year or 30-year loan is the best option or whether you should choose an adjustable rate mortgage to receive a lower interest rate early on.
- Overspending on a House
Lenders tend to determine your affordability based on your credit report and tax documentation. However, lenders often approve applicants for larger loans than they can really afford, because they don’t know the applicant’s entire financial situation. Rather than automatically accepting the higher mortgage loan, you should do your research and determine what you can truly afford. Then stick to you price range no matter what. Overspending on a house can cost you a lot of money in the long run. A large house not only means spending more on monthly mortgage payments, according to Investopedia. It also means spending more on utilities, which cut into your disposable income and prevent you from saving for retirement.
- Skipping a Home Inspection
While home inspections are usually not required when you are purchasing a home, it is important that you get a home inspection anyway to make sure that the house is structurally sound, according to CNBC. Skipping this inspection could mean overlooking serious problems with the electrical wiring, plumbing, roof or foundation. An inspector can easily identify these issues before closing and you can negotiate with the seller to either lower the home price or fix the problems themselves. If you skip this home inspection, you are then financially responsible for any problem that comes up after closing on the house.
- Failing to Shop Around with Mortgage Lenders
You can save a lot of money on your first home by speaking with multiple lenders. Since interest rates and closing costs tend to vary among different banks, you should acquire multiple quotes in order achieve the best rate and cheapest mortgage costs. You should request no-obligation mortgage quotes from at least three different banks or lenders. Then compare each quote to determine which one is the best option. Consider not just the mortgage rate but also closing costs, down payment, private mortgage insurance any potential prepayment penalties.
Home Search Mistakes
- Failing to Visit The House Multiple Times
If you find a property you really want right away, that’s okay. But make sure that you visit the property at least twice or three times before making an offer. The seller might try to rush to process or force you to make a quick decision. It is important that you are confident in your decision once you sign the closing papers. After your first visit to the house, go home, sleep on your decision and return to the house a couple days later. Make sure you look at the surrounding neighborhood and determine if the area is a good fit for you and your family.
- Limiting Your Home Search to One Neighborhood
Most buyers limit their search to one neighborhood or area. But it is worth checking out other neighborhoods just in case. You might find a home you love in the adjacent neighborhood and the school district might be even better than in the neighborhood you were originally considering. Be open minded when it comes to searching for your home and open up your search to multiple neighborhoods. Use listing sites like PropertyGuru Malaysia to search for property in Malaysia.
- Failing to Work With a Real Estate Agent
It is not necessary to work with a real estate agent in order to purchase a home. However, working with a buyer’s agent can be very beneficial for a number of reasons. The seller’s agent is much more considered about making the best sell for his or her client and they do not have your best interests in mind. Therefore, it is important that you work with your agent to truly get the best deal. A buyer’s agent can help you negotiate your bid, counter an offer and help you with the closing process.
Purchasing a house can be a stressful process, but you can avoid first-time homebuyers’ mistakes!