6 Pitfalls to Avoid When Buying a House
Once you’re on your way to home ownership, there are certain precautions you’ll want to take to further minimize your risks. Here are some tips to make your buying experience a more positive one:
• Know what you’re paying for upfront. Throughout the mortgage lending process, you’ll be faced with a flood of fees, some higher than others. From origination and escrow fees, to title insurance and property taxes, some may seem inflated while others fall in line with your expectations. You should never be afraid to question a fee you feel uncomfortable about or don’t understand.
• Try to avoid an early pre-payment penalty. Everyone wants to have the flexibility of paying off their 30- or 40-year mortgage early. The reward is not only owning your house outright but saving on interest charges. Work with a lender who is willing to waive any pre-payment penalties or can offer you the ability to refinance your mortgage at a better rate.
• Watch out for the classic bait-and-switch. We’ve all fallen victim to this one at some point or another. A lender may try to reel you in with low mortgage rates, no money down, or no closing costs, only to disqualify you with a less than perfect FICO® score. If you feel uncomfortable with the lender, or that they are not being truthful, then move on to someone you can trust.
• Don’t let real estate agents pressure you to buy. Realtors are motivated to sell homes in order to earn a commission. They may force you to buy something that doesn’t quite meet your expectations or pressure you to use their mortgage company. Always comparison shop for the best rates and programs. Remember, the real estate agent works for you and has a fiduciary responsibility to protect your best interests.
• Buy only what you can afford. It’s easy to get caught up in the hype of low-interest or no-interest introductory mortgage rates. Staying within your debt-to-income ratios can help prevent you from over-extending your debt. Use one of the affordability calculators to determine the minimum and maximum amount you can afford before going house hunting, and be sure to stick with your estimate.
• Never buy a home on impulse. At some point during your search for a home you may decide to settle for less or get caught up in a bidding war for a house you don’t necessarily want to buy. Staying within your budget can be a real challenge, especially if a lender approves you for a higher loan amount then you can afford. Give yourself permission to walk away from a questionable deal and see how you feel about it the next day.
Source: Informa Research Services