Gearing up to buy your first home? Bet you can already picture yourself furnishing the living room, picking out rugs for the hallway and freshening up the garden!
While shopping for a home might be a dream for many people, for others it goes hand in hand with nausea, panic and an overwhelming sense of dread – and with good reason too, when one considers the high costs involved and everything that might possibly go wrong.
Fortunately there are ways to sidestep costly minefields to ensure that the process is as stress-free as possible. Thus, to help you shop with ease and confidence, take a look at the 10 most costly mistakes to avoid before you put up that “sold” sign in your new front garden.
Like the most recent economic meltdown taught us, what the bank says you can afford and what you can actually afford is not necessarily the same. Should you not already have a budget in place, make a list of all your monthly expenses (excluding rent), including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings, etc.
Don't forget major expenses that only occur once a year, like any insurance premiums you pay annually or vacations. Subtract this total from your take-home pay and you'll know how much you can spend on your new home each month.
When calculating this figure, use a mortgage calculator to research current interest rates. This will give you an idea of what your total mortgage payments will be.
Looking at homes outside your price range will make you start lusting for something you can’t afford, which might put you in the dangerous position of trying to stretch your finances.
Make sure to get pre-approved for a loan before you place an offer on a home. Otherwise you might sign a contract and discover that the bank won’t lend you what you need, or that it’s only willing to give you a mortgage that you deem inappropriate, resulting in you wasting the time of everyone involved.
Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase. If you cause the deal to fall through, you may have to forfeit the several thousand pounds that you put up when you went under contract.
Owning a home means having additional expenses on top of your monthly payments.
Unlike being a renter, a homeowner is responsible for paying property taxes, insuring the house against disasters and making all necessary repairs (which might occasionally include very costly items like a new roof or furnace).
Feel free to put everything you can think of on your new home wish list, but don't be so inflexible that you end up continuing to rent for significantly longer than you really want to.
First-time homebuyers often have to compromise on something because their funds are limited. For example, you may have to live on a busy street, accept outdated décor, or forgo that guest bedroom.
Of course, you can always choose to continue renting until you can afford everything on your list, but then you have to be honest with yourself about how important it is for you to become a homeowner now rather than in a few years.
Can you stomach living with, say, hideous kitchen wallpaper for a while to be able to afford buying that house? If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don't let small physical imperfections turn you away.
After all, doing home upgrades yourself, even when you have to hire a professional, is often cheaper than paying the increased home value to a seller who has already done the work for you.
Minor upgrades and cosmetic fixes are cheap tricks that many sellers use to play on your emotions and elicit a higher price tag. Small touch-ups to a house generally cost significantly less than undergoing a full-scale home staging, so which one do you think that seller is going to opt for?
If you're on a budget, look for homes whose full potential has yet to be realised. Also, first-time homebuyers should always look for a house they can add value to, as this ensures a bump in equity to help you climb the property ladder.
Don’t buy a two-bedroom home when you’re planning on having lots of children. By the same token, don't buy a flat just because it's cheaper when one of the main reasons you're over apartment life is because you hate sharing walls with neighbours.
It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain.
Before you close on that sale, be 100% sure about what kind of shape the house is in. You don't want to get stuck with the headache of performing a bunch of unexpected repairs.
Keeping your excitement in check until you have a full picture of the house's physical condition and the soundness of your potential investment will help you avoid making a serious financial mistake.
Once you’re serious about house shopping, you don't want to walk into an open house without having an agent (or at least being prepared to throw out a name of someone you're supposedly working with).
Agents are held to the ethical rule that they must act in both the seller and the buyer parties' best interests, but you can see how that might not work in your best interest if you start dealing with a seller's agent before contacting one of your own.
Nobody can say with 100% certainty what their neighbourhood will look like 10 years into the future. However, paying attention to the information that is available to you now can help you avoid unpleasant surprises down the road.
Ask these questions about your prospective property:
• What kind of development plans are in the works for the neighbourhood?
• Is the street likely to become a major street or a popular rush-hour shortcut?
• Will a highway be built in your back garden in five years?
• What are the zoning laws in your area?
• If there is a lot of undeveloped land? What is likely to get built there?
• Have home values in the neighbourhood been declining?
If you're happy with the answers to these questions, then that house’s location might just be something worth considering.
Here’s a crazy thought: what if you’re not the buyer, but the landlord? Let’s see how to go about: Getting your property rental ready.