Buying a house is a great move for any person, but making a decision at the whim of a moment can lead to major pitfalls that can have a terrible impact on the person.
Buying a house is not easy, but it does not have to become a huge problem because you did not make the right choice on your mortgage, location, or type of house. Mortgage, however, is one of the biggest challenges that most homebuyers have and some have horror stories of seeing their dream turned into a nightmare.
So what are these pitfalls and how can you avoid them?
Know your credit status.
It is important that you know what your credit status is, you can get a report from the credit reporting agencies which can give you one annual report for free. Keep a close eye on the reports and make sure that if you see any problem, you resolve them as soon as possible.
Understanding your credit score is important because it is the deciding factor on whether or not to lenders will give you money. If you have low credit scores, you may need to give yourself some time to bring it back up before you apply for loans. While there are bad credit loans for people with poor credit scores, the interest rates on them are very high and they can end up being a pain.
Do not look for a house and decide that that is the house you’re going to get if the bank has not given you a pre-approval on your loan application. If there is a bidding process you’ll definitely lose out because only those who have ready cash will be given the first option. The bank will be able to tell you how much you can afford by looking at different factors including your income, and your financial health. You may think you deserve so much more, but the bank may have a contrary opinion and of course, at the end of the day the bank will win.
Taking the first offer.
When buying a home and are looking for mortgage financing, you should shop around. You can use your bank, but if they do not have attractive benefits then you have the option of going to another lender. Look for as many mortgage providers as you can, and compare the benefits including the interest rates, cash-back offers, and payment terms among others before making a final decision.
Not taking note of additional fees.
A mortgage comes with so many other fees and you should pay close attention to them. Ask your mortgage broker for a full breakdown of the fees you need to pay. Some of these fees include the loan origination fee, broker fees, application fees, underwriting fees amongst others. Clearly, this can have a big impact on the amount you are going to spend and you need to know where the money will come from to pay them.
You also need to consider that you will need to make a down payment because most lenders will not deal with someone who is not able to do this. Making a down payment is a sure sign that you will be able to pay back the loan. Factor in up to 20% of the loan amount as a down payment.
Not paying attention to the mortgage terms.
Sit down with your mortgage broker or a financial expert and let them walk you through the details of the mortgage terms. If there are certain clauses you do not understand, do not be shy to ask for a proper explanation. This will save your lot of grief in the long run.
Yes, buying a home can be very exciting and you may feel the need to rush the process, however, take time and understand everything about the process before you take the final step.