Buying a home is an exciting, expensive and risky process. After all, you will likely have to commit to spending many years’ worth of your salary to complete a real estate purchase.
Whether you are about to buy your first home or are back on the market after years of living at the same residence, you can avoid major mistakes that could end up putting you in a negative situation.
Bypassing inspection or title insurance may not be worth the savings
If you buy a mortgage-financed property, you will likely have to cover the cost of two title insurance premiums when you close. There is a policy to protect you, and also one that protects your lender’s investment in the transaction. You cannot forego the lender’s coverage, which means the only kind you can avoid paying for is the policy that protects your investment in the property.
Similarly, waiving inspection might save you a few hundred dollars in the short run, but it could cost you tens of thousands of dollars in the future if you don’t notice a defect. An inspector can spot issues like foundation problems that might drastically alter what you feel willing to pay for the property.
Don’t go house shopping until you go mortgage shopping
Imagine that you finally find the perfect house and during your private tour or an open house, you can see yourself living there happily. Unfortunately, you could lose out on the property or not be in a position to buy it at all.
Getting approved for a mortgage, ideally after talking rates and terms with several lenders, gives you an idea of how much house you can afford. Pre-approval also ensures that when you find your dream home, you are in a position to move aggressively so that you don’t lose it.
Be careful about draining your savings and maxing out your mortgage offer
Buying a new home often leads to unpredictable expenses in the first few months after a move.
While you do want to make a good down payment on the property, you should avoid having nothing left in reserve if the air conditioning goes out during the middle of July. You may also want to make a purchase that is slightly less than the maximum amount you can finance so that there’s a little wiggle room in your budget.
Getting help with every step of the process, from looking at title history on a property to closing can help reduce the likelihood of falling victim to these sorts of mistakes.