Buying a home is an exciting occasion. Whether it is a first home or one in a long list of prior residences, choosing and then purchasing a home is an emotional process that involves money, time and commitment. Once the purchase price is paid, there is no going back. Because this is such a large financial and long-term decision, it is important to make an informed choice. When there are emotions involved, it is easy to fall into certain traps when buying a house.
Affording a home
The first step in purchasing a home is to become pre-qualified. This is the process wherein a bank or some other financial institution determines a buyer’s financial ability to carry a mortgage loan. Factors such as a buyer’s debt and income are calculated together to produce a number for the amount of money that he or she can borrow. However, this amount does not take into account any personal discretionary spending or the amount that the homeowner will be spending on utilities, repairs and general upkeep.
When the bank first gives this figure to the prospective buyer, it can be tempting for them to get excited about this amount and dream of the future home they will be able to purchase. Practically speaking, though, they should be realistic in their affordability calculations and not get trapped into becoming “house poor” because they took out too large a house mortgage.
Not researching the market area
Before putting a bid on a home, the buyer needs to know the current prices for homes in the area. It is valuable to know not only the current selling prices, but what prices the individual homes sold for recently. Armed with this knowledge, buyers can discern whether a house is listed at a reasonable price and will be able to recognize true bargains.
Review before closing
Buyers should take time before the signing day to carefully review the documents provided by the bank and the real estate brokers. Items like the interest rate, all the fees and the completion of any requested repairs all need to be correctly identified and verified. This will prevent any unexpected surprises on the day of closing and prevent any delays.
Buying a house is similar to a long-term business partnership between friends. If the home buyer is informed about the business side of the transaction and is familiar with the features of the house, then a successful union will follow.