Forget about personal loans, buying a house requires taking out a whopping great big mortgage. Buying a home is like entering financial purgatory, you’re stuck in a holding zone until your 10, 20 or 30 years are up and you can finally start splashing out on all the things you’ve always wanted. And that’s the best case scenario. At worst, your house starts falling apart around you and even when you’ve nearly bankrupted yourself to fix it, you can’t sell it. Find out how to avoid the worst case by learning from the mistakes made by others and following these seven handy tips:
- Know what you can afford: It sounds obvious, right? But it’s easy to be tempted by a lovely house that just a ‘little’ over what you were expecting. Or, to take your mortgage provider’s word as gospel and get a loan for the maximum amount available. You might qualify for a loan of a certain amount, but can you really afford the monthly payments when you tally up all your other essential, non-negotiable expenses?
- Shop around: Don’t take the first mortgage offer that comes your way. Consult several providers to see who has the most favourable interest rates and best repayment conditions.
- Find out about hidden costs: How Stuff Works estimates that hidden costs could add up to 5% of the purchase price, so be aware of: appraisal fees, credit report fee, escrow fee, homeowner’s insurance fees, property tax, home inspection, and lawyers’ fees.
- Market research: Find out about property prices in several different neighbourhoods, get a feel for what is reasonable and what is excessive, and find out what you can about the current trends in the market. You don’t really want to buy if it’s a seller’s market because then property prices are high. Try hold out for a buyer’s market when prices are more favourable.
- Resale value: One of the reasons that people buy homes is so that they can sell them for a profit later and move up the property ladder. To do that your house needs to have broad appeal. A unique layout and quirky features might appeal to you but will it appeal to others when you put it on the market. Is the neighbourhood good enough to attract buyers, will it stay that way? Will you have to put a lot of work into the house to resell it and are you likely to recoup those costs?
- Buying a fixer-upper: Don’t do this unless you are a fixer-upper person or couple. Chances are that you won’t get round to the gutters, roof tiles and floors until the state of disrepair is dire. Or, you could find out that the costs of repairing and renovating the house far exceed what you expected. If renovating homes and reselling them is your hobby or even your career then go-ahead but don’t settle for something cheap when you know you won’t get full value out of it.
- See several real estate agents: Don’t feel obligated to stick to one agency or one agent. You are entitled to see as many agents as it take until you find one you trust and who you know has your best interests at heart.
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