For most people, a home is their most significant purchase. This is why buyers would try to think of all the possible ways they can save when making an investment. But then, we often get too excited once we start looking for houses for sale. We make decisions without thinking about how these can influence our future finances. The result is we spend more than we intend and can afford and suffer the consequences for a long time.
Here’s how you can mitigate future financial risks when buying a house.
Save Aggressively for the Home Purchase
Before you even execute your plan to buy a house, it is best to start saving aggressively for the down payment. This will increase your chances of getting mortgage approval. You can also use the extra funds for the other costs associate with the sale and your home maintenance and repair.
The more money you put down for the down payment, the better your interest rates and monthly mortgage payments will be. With a 20% down payment, you can even avoid Private Mortgage Insurance (PMI). This saves you thousands of dollars over your loan period.
Shop for the Right Lender and Home Loan
Many buyers focus on finding the right mortgage. They believe the key to saving money is to get a home loan with lower monthly premiums and low interest fees. But you can actually save more if you also choose the right mortgage lender.
Not all lenders are the same. There are those whose real intention is to get more out of their borrowers. If you are not careful, you can end up taking out a home loan from a predatory lender.
Choose a lender that won’t pressure you to take out more than you can comfortably afford. You should never trust someone who tells you to lie on your application. It is against the law to lie just to obtain housing.
Be Sure to Have a Contingency Clause
Contingency clauses in real estate can protect you in case the loan falls through. There can be many conditions in the contingency clause that will allow you to back out of the sale. If this happens and you chose not to push through with the sale, you can get your money back without any consequences.
For instance, you lost your job, the seller refused a home inspection, or the home inspection result came with many necessary repairs. If the agreement you signed did not specify these reasons in the contingency clause, you will be obliged to push through with the sale. If you chose not to, you can end up losing your deposit or reservation fee.
Before you sign any contract or agreement, consult your real estate agent. They can make sure that you are well-protected by ensuring the contract you sign have reasonable contingency clauses. In case you chose not to continue buying the house, you won’t lose your money and move on house-hunting.
Don’t Ignore Homeowner’s Association (HOA) Fees
Most homes are part of a Homeowner’s Association. This means they are obliged to pay fees and dues and live under the rules of their designated HOA. Failure to consider your future HOA fees will only add up to your monthly financial burdens.
HOA fees can be cheap while others can go for up to several hundred each month. Aside from your monthly mortgage, utility bills, and property taxes, you will need to pay your HOA fees. So, be sure to ask the seller and do research if the neighborhood is really a part of a homeowner’s association structure or not.
Always Invest in Home Inspection
Home inspections are not usually required to buy a house with a home loan. But then, a home inspection is an actual investment as it can help you learn more things about the house you plan on selling. You can actually save money and determine how much the property is worth with the help of a home inspection.
No matter how many buyers are interested in buying your preferred house for sale, be sure to require a home inspection. Many buyers are skipping home inspections amid the pandemic. But as much as possible, don’t skip this crucial step to ensure you don’t end up with a fixer-upper home you can’t afford.
A home inspection can reveal illegal additions in the house that do not conform to local building codes. You can actually forecast future costs in case major systems require an immediate replacement or installation. A qualified home inspector can even tell you if home insurance providers will insure your home with its current condition or not.
There are many other things you can do to get the most out of a home purchase. Staying vigilant and knowing the basics will help you reduce your costs and boost your savings during the home purchase. Don’t let your emotions ruin your decision-making and think about all the financial aspects of your home-buying to enjoy the best results.
