Are you planning to buy your first house? Shopping for a home can be exciting, exhausting and a little scary. In the end, your aim is to end up with a home you love and at a price you can afford. Sounds simple enough, right? Unfortunately, many people make mistakes that prevent them from achieving this simple dream. Keep these simple tips in mind to get the most out of your purchase and avoid making some of the most costly mistakes that could put a hold on that sold sign.
- Not Knowing What You Can Afford
As we've all learned from the subprime mortgage mess, what the bank says you can afford and what you know you can afford or are comfortable with paying can be two different things. If you don't already have a budget, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings, and so on. Don't forget massive annual expenses, such as any insurance premiums you pay annually or annual vacations. Subtract this total from your take-home pay and you'll know how much you can spend on your new home each month. When calculating this figure use a mortgage calculator to research current interest rates. This will give you a rough estimation of what your total mortgage payments will be.
- Skipping Mortgage Qualification
Once again, what you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income. So make sure to get pre-approved for a loan before placing an offer on a home. If you don't, you'll be wasting the seller's time, the seller's agent's time, and your agent's time if you sign a contract and then discover later that the bank won't lend you what you need, or that it's only willing to give you a mortgage that you find unacceptable.
- Being Too Picky
Go ahead and put everything you can think of on your new home wish list, but don't be so hasty that you end up continuing to rent for significantly longer than you really want to. First-time homebuyers often have to compromise on something because their funds are limited. You may have to live on a busy street, accept outdated decor, make some repairs to the home, or sacrifice that extra bedroom. Of course, you can always choose to continue renting until you can afford everything on your list - you'll just have to decide how important it is for you to become a homeowner now rather than in a couple of years.
- Lacking Vision
Even if you can't afford to replace the hideous wallpaper in the bathroom now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford. If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don't let physical imperfections push you away. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.
- Compromising on the Important Things
Don't get a two-bedroom home when you know you're planning to have kids and will want three bedrooms. On the same note, don't buy a condo just because it's cheaper when one of the main reasons you're over apartment life is because you hate sharing walls with neighbours. Think ahead by 10 years or more. It's true that you'll probably have to give and take a few circumstances to be able to afford your first home, but don't make a compromise that will be a major strain.
- Not thinking about the future
It's impossible to perfectly predict the future of your chosen neighbourhood, but paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road. Among the thoughts that should be in your head when buying a new home should be about the kind of development plans that are in the works for your neighbourhood in the future because obviously you don’t want to live in a deserted area. Also think about highway development plans around the area. Without that, getting around will be difficult.
- Lack of inspection
It's tempting to think that you're a homeowner the moment you seal the deal, but not so fast! Before you close on the sale, you need to know what kind of shape the house is in. You don't want to get stuck in a pit of problems or with the headache of performing a lot of unexpected repairs. Keeping your feelings in check until you have a full picture of the house's physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.
- Being Swept Away
Minor upgrades and cosmetic fixes are inexpensive tricks are a seller's dream for playing on your emotions and eliciting a much higher price tag. Sellers may pay thousands of Ringgit for minimal upgrades or pay several thousand Ringgit on staging. If you're on a budget, look for homes that have potential. Also, first-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you up the property ladder.
- Not Choosing to Hire an Agent or Using the Seller's Agent
Once you're seriously shopping for a home, don't walk into an open house without having an agent (or at least being prepared to throw out a name of someone you're supposedly working with). You don’t want to be a victim of getting cheated. Agents are held to the ethical rule that they must act in both the seller and the buyer parties' best interests, but you can see how that might not work in your best interest if you start dealing with a seller's agent before contacting one of your own.
- Failing to Consider Additional Expenses
Once you're a homeowner, you'll have additional expenses on top of your monthly payment. Unlike when you rented, you'll be responsible for paying property taxes, insuring your home against disasters and making any repairs the house needs (which will occasionally include expensive items like a new roof or a new furnace).
If you're interested in purchasing a condo, you'll have to pay maintenance costs monthly regardless of whether anything needs fixing because you'll be part of a homeowner's association, which collects a couple of hundred dollars a month from the owners of each unit in the building in the form of condominium fees.
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This is only a sample.
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Buying a first home can seem stressful and overwhelming, and it isn't without its share of potential pitfalls. If you're aware of those issues ahead of time, you can protect yourself from costly mistakes and shop with confidence.
