There is lots of advice about what to do when you buy a house. However, what many articles and posts overlook is what you shouldn’t do when you buy a home. Since knowing what not to do can help you avoid making a very costly mistake, let’s take a look at the top five things to steer clear of during this process:
Putting Down the Bare Minimum Downpayment
Although there are lots of stories in the news about how much the lending industry has changed since the mortgage meltdown, the truth is many lenders are once again relaxing their requirements. As a result, you can probably find at least one lender that will only require a 3% downpayment. While that sounds great, the truth is it puts you in a risky position.
The reason that small of a downpayment is risky is if anything goes wrong and you have to sell, it’s almost guaranteed that you’ll end up owing more than the price of the sale. Because that’s the last thing you want, the best rule of thumb is to remember that you can only truly afford a home if you’re able to comfortably put 20% down.
Stretching Your Budget
There are times when looking for a house can be very stressful. However, there are also plenty of times when this experience can be a lot of fun. In fact, it can so fun that it’s easy to get a little carried away. Because excitement can influence your ability to make a savvy decision, prior to starting your actual search, it’s crucial to set a firm price range and budget. Once you’ve set your limits, make sure you stick to them!
Some people think that they can save money by skipping inspections. While that’s technically true, if there are any problems, not knowing about them prior to closing means the buyer’s going to end up paying a whole lot more in the long run. Not only are inspections crucial, but it’s important to do your homework so you can find an experienced professional you can trust.
Buying When You Know a Move Isn’t Far Away
It takes a significant investment to buy a house. It’s also obviously a huge financial decision. Although renting may seem like you’re throwing money down the drain, given the current state of the market, buying a house doesn’t make sense for most people who don’t plan to stay in their house for at least a few years.
Overlooking Additional Costs
When you’re calculating your budget, don’t forget that the cost of buying a house involves more than just its listing price. You’ll also need to take into account closing costs, property taxes and average utility costs. By factoring this information into the budget you set for yourself, you’ll maximize its accuracy and usefulness.
About the Author: Joseph Smuckateli is a freelance writer who blogs about income tax and other finance related topics