Avoiding Costly Mistakes in Real Estate: The Homebuyer Manual
There are many costs associated with buying a home beyond the actual purchase price. Closing costs are the costs that most often surprise first-time buyers. These various fees required to complete the transaction can add up to 2 to 5 percent of the purchase price.
Take a look at an excellent summary of all the costs when buying a home. Talk with all the parties involved that may charge you fees to be aware of what you are facing, including your agent, your lender, the insurance company, the title company, etc. If you are on a budget, you need to keep an open mind about the homes you will consider.
Sometimes a beautiful home will be poorly photographed , or otherwise poorly marketed so that most buyers avoid it automatically. But if your agent tells you it is still worth considering, listen to him or her.
12 Common Home-Selling Mistakes: What You Should Know
You may discover a property that is perfect for your current needs. Sometimes the best-looking home online turns out to be a dud in person. The exact opposite scenario can occur as well because of the above-mentioned reasons. The area where the home is located is arguably just as important as the actual property. Many first-time buyers are so fixated on the house that they fail to account for the area, which is a mistake.
There are a lot of factors related to the location that will significantly affect your experience living there, including the crime rate , the traffic, public transit options, school systems, amenities, and more. For example, if you love walking your dog, but there are no areas to walk near your home, you could quickly become frustrated with your purchase. Do some careful research to make sure the amenities you require on withing tolerable distances to your home.
Picking the right neighborhood is an essential part of your home purchase. Paying attention to how the neighboring properties look is a crucial consideration as well.
Will you be able to get along well with the neighbors? Real estate agents can serve a variety of roles in a real estate transaction—and not all of those roles are going to benefit you as a buyer. One of the biggest potential problems with agents is if they serve as a dual agent. Not all states allow dual agency, but if you are interacting with a dual agent, you definitely want to know about it. The dual agent will attempt to represent both the seller and you, the buyer, which in reality is impossible to do.
You and the seller have different goals. Be sure to ask the agents you are working with who they represent so that you can put your trust in those who have your best interests in mind. The most vital thing to understand about dual agency is that YOUR agent will no longer be able to give you any kind of guidance during the sale. Doing so is forbidden by law and is one of the reasons why dual agency is so controversial. The ONLY person who benefits from dual agency is the real estate agent! Most sellers are going to do their best to pretty up their properties to attract buyers.
They may invest in new landscaping, granite counters, and fresh paint, for instance. While these surface-level improvements are undoubtedly attractive, you want to avoid getting too drawn in by them.
There are other components to the home that is likely to cost you big money if they are not in good condition. You should make a list of the significant components that need to be in good working order for the home to be livable—like the roof, the plumbing system, the electrical system, and the HVAC system. Find out how much life is left in all the crucial components so you have a clear idea of what financial burdens you will face in the next few years after you buy the home.
The process of getting the contract written and signed is often hectic and stressful, especially when you are competing with other buyers in a hot market. Unfortunately, the confusion you may experience during the contract process could make it where you forget to put contingencies in that are really important to you. For instance, if you are buying a home that is being rented out , you need to put a contingency in the contract that the renters will be moved out before you get the home—if you want it empty. Otherwise, there is a good chance that the renters will still be there.
Talk with your agent about any contingencies that he or she thinks you should consider and make sure they are in writing before you close on the home. You definitely have to rely on others to purchase a home—including your agent, lender, inspector, etc. But ultimately, the outcome is in your hands. All of these people will hopefully try to do their jobs as best they can, but they are only human and can make mistakes.
You will be the final word and the one to authorize the transfer of money to the seller. That means the ultimate responsibility falls on you. While you can and will feel overwhelmed, you can also be empowered during this process. Yes, you can make mistakes too. You can miss things. But even if you miss something that later annoys you, the fact is that you still managed to buy your first home. Enjoy what you have accomplished and feel a little pride.
Every first-time buyer can do some second-guessing after they finalize their purchase. You just did something significant, and you will quickly realize that you may not fully appreciate your new position until the dust has settled.
What if you should have bought that other home? Lenders will give you estimates of closing costs, and you can call around to get estimates of moving expenses. One day, you apply for a mortgage.
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A few weeks later, you close, or finalize, the loan and get the keys to the house. The period between is critical: You want to leave your credit alone as much as possible. Wait until after closing to open new credit accounts or charge big expenses to your credit cards. Applying for credit can reduce your credit score a few points. Getting a new loan, or adding to your monthly debt payments, will increase your debt-to-income ratio. Within about a week of the closing, the lender will check your credit one last time.
If your credit score has fallen, or if your debt-to-income ratio has gone up, the lender might change the interest rate or fees on the mortgage.
1. Not figuring out how much house you can afford
It could cause a delay in your closing, or even result in a canceled mortgage. How to avoid this mistake: Wait until after closing to open new credit accounts or to charge furniture, appliances or tools to your credit cards.
How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place. After you buy a home, the monthly bills keep stacking up. Renters often pay these kinds of bills, too. First-time home buyers are frequently surprised by high repair and renovation costs.
Buyers can make two mistakes: First, they get a repair estimate from just one contractor, and the estimate is unrealistically low. Second, their perspective is distorted by reality TV shows that make renovations look faster, cheaper and easier than they are in the real world. How to avoid this mistake: Assume that all repair estimates are low. Seek more than one estimate for expensive repairs, such as roof replacements. A good real estate agent should be able to give you referrals to contractors who can give you estimates.
But you also should seek independent referrals from friends, family and co-workers so you can compare those estimates against ones you receive from contractors your agent refers. What's next? Want to take action? Follow this step-by-step guide to getting a mortgage Want to dive deeper? Get the facts on down payment strategies Want to explore related? Discover tips for first-time home buyers. At NerdWallet, we strive to help you make financial decisions with confidence.
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