Buying a house is exciting, but it can be intimidating at the same time. It is a big decision financially, so you should be careful every step of the way. Excitement of buying a new house can sometimes make you take decisions that you will end up regretting. Fortunately, plenty of people have gone through this process already and you can learn from their mistakes. Below are some five mistakes home buyers do along with some smart ways to avoid any regrets in future.
Buying a bigger house with all the luxuries is a dream of every hard working Canadian. When you apply for a mortgage pre-approval, the high pre-approval amount may surprise you. You might immediately set your sights on houses at the high end of your price range as you begin to imagine the possibilities. However, qualifying for a large mortgage does not mean that you should go to your maximum affordability.
Nowadays, interest rates are quite low as compared to the past. But what will happen if interest rates increase in the future? If there is a shift in interest rates, there is a chance that a mortgage that you can afford right now will be out of your hands in the future. This is one of the most important factors to keep in mind while planning the purchase of your new home.
Before starting your home search, you should first evaluate your finances and estimate the amount of money you can afford realistically for the purchase of the house. Go for a pre-approved mortgage, it will also help you narrow down your search for the house.
We all have a list of luxuries that we want in our new home. These items may vary from person to person but if they are found in a house it may make you forget about the neighborhood. This approach can be very damaging in the future. Firstly, in terms of accessibility, you should look for a neighborhood that is situated near a city's major transit routes. Going to and coming from work is a big part of many people's day, so a house with easy access to roads and public transportation will be more desirable.
A great neighborhood should also include important amenities such as grocery stores, shops, and restaurants. If you have a long drive to get these amenities, it is likely to make your house less attractive.
Schools are another important factor. Even if you do not have kids, if you want to sell your home in the future, many buyers will be on the lookout for good schools. The quality of local schools and the distance from the house are both important factors to consider. You should keep the quality of life and livability of neighborhood in mind during your house search. Remember you can renovate your house in the future but you cannot redesign an entire neighborhood.
Because of the competitive nature of some markets, many buyers are offering significantly more than the asking price on a house. This road is usually followed by buyers who want to win a bidding war. This approach can help beat your competitors but it can create problems.
One of the dangers of offering too much money is a low appraisal. If the home does not appraise high enough, buyers may not qualify for the mortgage they were anticipating. This may lead the buyer to obtain a second mortgage on the property to cover the difference. If you are obtaining the second mortgage from a private lender, it will cost you more money because their interest rates are quite high and there can be several additional fees.
In order to avoid this mistake, consult with your realtor to get a market analysis of the area. A market analysis is created by looking at recently sold comparable homes and can shed light on how much you should offer. Performing an accurate market analysis is not a big deal for a good realtor with knowledge of local area.
If a seller has multiple offers, with price and all other terms being approximately equal, the offer from a buyer who waives the home inspection is most likely going to be the one the seller chooses. Buyers often omit inspection condition for this reason.
If you have a big home maintenance or emergency fund, it is worth considering waiving the inspection contingency. If not, doing so is a gamble. It is not like buying a used automobile because the potential problems you inherit with a home can cost you thousands of dollars.
Home inspections are one of the easiest ways to avoid any future disappointments. It can be tempting to skip this step. After all, it requires time, energy, and resources. But you may find that the home inspection costs are the best money you can ever spend.
It is also a good idea to be physically present during the inspection. You will learn more about the house while listening to the inspector. Buyer should make sure that a home inspection clause is included in the agreement of purchase and sale.
The longer you live in your property, the greater value you may get out of it in the future. Frequent moves can be expensive, and while you sell a house, you end up paying a lot in realtor fees and moving expenses. The residence you think is ideal for now may not be so ideal two or three years into the future.
The “Five year Rule” states that, if you do not own your property for a minimum of 5 years, you are probably going to lose money on it. While you buy your new home, be sure to look properly into the future and ask yourself a lot of questions.
If you consider the house a starter home, will it be easy for you to resell it? If you plan to stay in the home into your golden years, will you be able to manage it as you grow older or should you look for one with fewer stairs or a smaller yard? In case you are planning to have children, does the home have enough bedrooms and storage space? Will you be able to continue paying for your monthly mortgage payments in case you or your spouse decide to stop working and to stay at home with the children?
A number of situations can make a house that is perfect now into one that just does not work in a number of years, so be sure to consider the future and plan accordingly to avoid any difficulties in the future.
After going through all the mistakes mentioned above, a home buyer can conclude that these mistakes can be avoided by proper planning, effectively managing the finances and by rational thinking. The property you are considering to buy must be beneficial for you in the short term as well as in the long term.
Always go with the pre-approved mortgage so you will know what your boundaries are. It will also let your seller know that you are someone who is seriously looking for a house and have a good credit score.
Do not let emotions cloud your judgment, think rationally, and obtain a mortgage that you can afford realistically. This is probably the worst of the house buying mistakes a buyer can make. In my opinion, you should also have a buffer. If your finances go south, you should have saved enough to pay your mortgage for 6 months.
Neighborhood should be taken into account during your house hunt. Make a list of amenities that you will regularly need and see if they are at a convenient distance from your home. A smaller house with all the facilities such as good schools, public transport, grocery stores etc. is way better than a bigger house in a far off area.
Do not get emotionally attached with a house. It can make you offer a higher price than the actual worth of the house. Buyers also do the same mistake to win bidding war. When the appraisal is too low, buyer will end up paying the difference from their own pocket. Always consult you realtor in such situations. Your real estate agent must have experience in real estate and should also have local knowledge to help you in such situations.
When you are spending a fortune for the purchase of the house, do not skip the house inspection just to beat your competitors. It is a gamble that can hurt you financially.
The factors mentioned in this article play a vital role when it comes to buying a home. You should plan properly before you act, it will help you avoid future remorse.
Assistant Manager, Real EstateTreadstone Associates