Mistakes can be very costly when it comes to buying a house. Many unscrupulous mortgage brokers would too often convince the homebuyer to spend more and buy a bigger house. This leaves little room for financial maneuver as other costs grow with time making the house not affordable.
What people forget is that mortgage brokers are sales people: they have quotas to fill and a commission to make.
Buying a house requires proper planning, and here are four main consideration to help guide you safely to the home you desire.
Interest rates are negotiable.
Long gone is the time when you could get a lone based on your character, capacity, and collateral.
Computers have made this much more impersonal and credit scores are now key to provide the financing you need. However, there is always a capacity of flexibility in the exact rate and financing plan. Thus, you should visit at the very least two or even three financial institutions and then make them compete for your business so you can get the very best deal.
Doing this could end up saving you thousands of dollars or shave years off your mortgage.
Before you visit your lender, make an optimist, a pessimist and realistic budgets.
Be aware of how much you can afford to spend monthly for your lodging including: taxes, insurances, expenses such as landscaping, snow removal, pool maintenance, repairs, decorating, utilities… and factor them in your payments.
Your lender will suggest numbers but this is one of the two most important times to keep a cool head and remember your homework.
Houses do evolve with time.
A house will change with time, and this will have its toll on its construction. Many details that you would miss can cause a large headache in the future. That is why it is best to use a professional house inspector to look for details such as insulation, electricity, plumbing, and any suspicious moisture or wall cracks. They can also usually give you an idea of how much it would cost to bring any of these up to code.
Often, a good inspection done by a professional can usually pay for itself by using it as a bargaining tool.
The cost of continuous home improvements is also another consideration. Is this going to be your house for the next fifty years or is this a stepping-stone towards your dream home? It is always time to add a new patio, to replace the windows, or to buy a spa. However, is it worth it?
Shrink your mortgage.
If you have extra cash at the end of the month that can be applied to your mortgage payment will save you thousands of dollars when done over many years. Just make sure, when you choose your mortgage plan, that it would not penalise you for additional payments. Many lenders would have a penalty for early mortgage payments to protect their profits!
Owning real estate has advantages.
Choices: as the owner, you choose a house that matches your current needs, has enough room for future expansion or maybe is large enough for you to lease parts of it.
Equity: every month, your payments decreases your outstanding mortgage and builds your home equity. This could be useful eventually to secure a loan for any future needs if necessary. The added bonus is also when the value of your house increases, but this is too variable to predict.
One final important factor to consider before making your decision is that you make your money when you buy but realize it when you sell. It is essential not to pay more than the fair market value, and to consider all your cash flow factors (mortgage, interest rates, insurance, taxes and repairs) which may negatively affect your exit.
Surround yourself with trustworthy advisers such as an accountant, a lawyer and a real estate agent who has a reputation of integrity and good negotiation skills.