Buying a home can be one of the most exciting times of your life, along with the most stressful time! Here are 5 common mistakes for you to avoid when buying a home.
1. Do not, go over budget
This may seem like a no brainer. However you would be surprised how many clients I work with that have a budget of X amount of dollars, and find something they absolutely love but just can’t afford, yet buy it anyways!! It’s like buying a new car, you never test drive a car you know you can’t afford.
10,000-20,000 extra in purchase price can make a huge difference. When you are purchasing a home you don’t tend to look at what life may throw at you. Always consider, that the reality is, life happens, and you need to be prepared for when it does. A good rule to follow is the 50/20/30 guideline. 50 % of your monthly take away income goes towards fixed costs, meaning bills that are the same and expected every month. (Phone bill, car insurance, gym membership, mortgage or rent payment, utilities etc.) 20% of your monthly take away income should be towards your financial goals. Now this is different for everyone, if you have debt you need to pay down. This should go towards that. If you have no debt, this should go directly into a savings account. And lastly, 30% of your monthly take away income goes towards flexible spending, this is spending that varies from month to month, such as groceries, gas, entertainment, meals out etc.
2. Factor in added costs when buying a home, forgetting this can be a huge mistake!
The first 6 months tend to be the hardest when moving into a new home. The reason is, you are not simply replacing your rental payment for your mortgage payment. There are initial lawyer fees, property tax, start up cable costs etc. Factor in every single cost in order to make your budget, and not simply what the mortgage payment will be.
3. Do not skip the inspection!
Yes it is an added cost, however…what could be worse, is finding out it’s a leaky condo 5 years down the road and getting a bill of 20K. Have the inspection for peace of mind and to ensure you are living in a safe and sturdy home. Keep in mind, if there are minor repairs that need to be done, you may be able to negotiate the purchase price in order to factor in repair costs.
4. Get everything in writing and read the fine print!
Again, this one may seem like a no brainer but be sure that this step is not skipped. Although you have a mortgage broker, realtor and lawyer working on your behalf, you need to be aware of the entire process, the realtor may read something and think it is not problem, where as you read it and you are not happy with it….everyone’s perception is different. You are spending too much money to not have everything on paper and the fine print read.
5. Do not put down a nominal down payment
Now this one is different for each person. Yes it is in your best interest to put the most money down you can in order to save on insurance premiums and have your best chance at getting the best mortgage product and interest rate. However, I know that is not the case for everyone. If you are not capable, that is no problem. But if you are, a big mistake is clients will have 50K saved in the bank and only put 15K down. The problem with that, is you are now paying possibly 10k or even more on insurance premiums, so you are better off using that 50K and putting it straight into your biggest investment….your home!!!