A house or condo is the biggest and most expensive item most of us will ever buy. Mistakes during the home shopping or buying process can literally cost you thousands, and depending on the type of mistake, it could cost you tens of thousands of dollars over the life of the loan. Here are the top secrets home buyers need to know.
Bigger Isn’t Always Better
A yard for your children to run around in is good. A massive yard may be a burden as you add more time to the schedule to trim it and weed it. It will also increase your property tax bill. A home with the space your family craves is invaluable, but buying the biggest home you could literally afford is a major mistake. You could end up being “house poor”, spending so much each month for your mortgage and other mandatory expenses that you cannot afford to do anything else. Buying a home in an upscale area in the hope that it will help you seem successful nearly guarantees you won’t achieve financial success. The book “The Millionaire Next Door” discusses how the higher level of spending set by social expectations in an upscale area can eat into your budget even as you pay more for the mortgage and property taxes to simply live there. In short, don’t buy the most you can afford. Give yourself and your budget some breathing room.
You Can Save a Lot by Shopping for a Mortgage
Your current bank or credit union may not have the best mortgage rates in Red Deer. Financial institutions vary in their definition of a credit risk, so someone with middling credit may get a good rate with one place and a bad one with another. Loan terms vary wildly, as well, from closing costs to restrictions on prepayments. Saving a fraction of a percent on a loan because you already have a savings account with the institution is minimal compared to saving a full percentage point on a mortgage by going somewhere else. Consult with a Red Deer mortgage broker to learn what mortgage products would be right for you and your situation.
Consider All the Costs
This adage has several variations. First, there is the mistake of only thinking about the mortgage balance while ignoring closing costs, inspection costs and other fees you still need to pay for as part of the home buying process. Failing to budget for these added costs at closing could lead to draining your savings or having to roll the costs into the loan, increasing your monthly expenses.
Another mistake is buying a home and only thinking about the mortgage payment. For example, home owners take on the maintenance costs their landlords used to have to cover. You’re now responsible for the taxes and upkeep of the property. You may owe dues and fees to the homeowners’ association regularly just for living in the property. If you buy a large home, you’re probably going to pay more for water and electricity than when you lived in an apartment. The cost of utilities is a major shock if your current apartment is bills paid. And give yourself room in your budget for these costs to go up.
Nearly No One Wants to Live in a Home Repair Show
Home repair shows make rehabbing a house look fun and easy. And it may be for the dedicated do-it-yourself repair person as long as you aren’t living in the middle of the mess. Trying to make dinner in kitchen that’s half disassembled or living in a home where the only working toilet is downstairs is a major hassle. If the home needs major repairs, either make the repairs a condition of the home purchase or budget time and money for the repairs to be done before you move in while taking the expected bill out of the price you’re willing to pay for the home.