Sunday, April 29, 2012

Costly Home Buying Pitfalls and How to Prevent Them

Whether you are an aspiring first time home buyer or not, it is easy to get caught up in the thrill of the hunt and consequently make a few bad choices. To keep your next real estate transaction worry-free, here are three simple suggestions for avoiding common pitfalls that often besiege home buyers.
Know what you can afford
Before you peruse real estate listings, take the necessary steps to get preapproved for a mortgage. Check your credit report and work to clear up any errors that might be reported. Pay all bills on time and pay down debt if needed to improve your credit score over time. Get your financial ducks in a row, such as gathering W-2 forms, pay stubs, and bank statements.

Be aware that prospective home buyers who are preapproved for a mortgage also stand a better chance of having their offer carefully considered by sellers. When you are preapproved it is much less likely that the sale could be derailed due to an issue obtaining financing for the purchase.
Be realistic about the long-term and hidden costs of home ownership
In addition to getting preapproved before you house hunt, future home buyers should also conduct a realistic budget analysis. Get familiar with the long list of costs that a real estate transaction requires, such as taxes, insurance, and closing costs. Next, review your monthly household expenditures. How about the mortgage principal, moving expenses, an emergency fund, furniture, tools, or HOA fees? When that’s all taken care of, will you have something left over for utilities, gas, groceries, and savings?

Remember, “fools rush in.”

You have heard it before, and it is so true, “a home purchase is likely the largest single purchase you’ll ever make.” That’s why it is of utmost importance to take your time and proceed with caution. Choose your real estate agent and mortgage lender very carefully. Get references, conduct interviews, and make sure that you feel completely comfortable with these individuals. Ideally, your agent and lender should have only your best interests in mind, be good listeners, provide you with constructive input, and sound advice. If you ever feel like they do not grasp your situation or what you are looking for, find real estate and mortgage professionals that do.

When it comes to your dream home, don’t be blinded by love. Pay attention to the inspection report and then thoroughly investigate the neighborhood, traffic flow, and ask yourself if this home will be conducive to your lifestyle in terms of proximity to things that are important such as work, school, retail, recreational, cultural, and entertainment venues.

Finally, consider the home’s resale value. Although it may be “the one” right now, things change and you may want or need to move on in several years. Consider how difficult it may be to find a buyer when you are ready to move on to a new home. Being priced considerably higher than other homes in the area, having a very unusual floor plan, or an extremely dated design are all aspects of a property that could negatively impact resale.
The following is a guest post from Lisa Andree with the home financing blog, Mortgage-Rate-Review. She covers trends in real estate, mortgages, and USDA mortgage financing.

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