Author:LearnVest
LearnVest offer sound financial tips and advice for every aspect of life. Check out these friendly warnings for prospective home buyers.
Insanely low mortgage interest rates — and the knowledge that they’ll eventually go up again — make a lot of people feel like it’s time to buy a house right now. And maybe it is … if you go about it the right way.
Buying a home is a major purchase (to put it mildly), and there are plenty of ways to trip up. But don’t worry — we’ve got your primer right here.
DON'T … buy a house if you’re planning to move again soon
If you’re a renter, it can be frustrating to write a rent check every month and have no home equity to show for it at the end of the year. But if you aren’t certain that you’re going to stay put for a few years, it’s probably not the right time to buy — equity or no equity. “Some people tend to buy a house knowing that they’re going to be relocating after a few years,” says LearnVest Planning Services certified financial planner Ellen Derrick. “Don’t buy property and automatically assume that you’ll be able to rent it out or sell it when you move.”
What to do: If you aren’t in an area with a strong rental market that would allow you to cover the mortgage on your home if you move elsewhere, then stick with a rental for now.
DON'T… bust your budget
What to do: Get pre-approved for a mortgage. Not only will this prove that you’re serious to your real estate agent and home sellers; it will also give you an idea of your upper limit. “Remember that the lender is there to make you a loan, and the more money you borrow, the better it is for them,” Derrick says. “They want you to max out. I would take the pre-approval number and cut about 20 percent off.”
DON'T… forget about added costs
What to do: Ask the homeowners about their average utility costs and property taxes, get a homeowner’s insurance quote, and budget about one percent of the home’s purchase price for annual maintenance. Then run the numbers to see if you can afford the home. (And, don’t forget about closing costs.)