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Common Home Buying Mistakes

By ResidenceBuy India  |  0 comments   |  2568 views  |   Feb 04 2012

There are some common errors people make when buying a home. Be aware of the following home buying mistakes so that you can avoid them yourself.

Rushing to buy a house: Purchasing a home can be an exciting experience, but many home buyers rush into it. See as many houses as possible even if you think you have found your dream house. Make a list of all the houses you have seen and create a pros and cons list for each of them. After the initial euphoria of visiting the houses are over, the list is the best friend you have. Buying house is a deep commitment (perhaps second only to marriage) so be deliberate about it.  

Not getting the pre-approval before house hunting: Getting a loan pre-approval gives you the budget you are working with, thus you can do good research on houses you can afford. Buyers with pre-approval in place are more attractive to sellers than those without it. Also, by having pre-approval, you'll avoid being outbid by another buyer who gets his financing together quicker.  

Trying for neighbor's envy: Another temptation is to buy the most expensive house on the block. Most of us change homes at least once or twice in our lifetimes. That's when buying the best house on the block isn't a good idea. When it comes time to resell the house, you may find that your asking price far exceeds the price range of other homes in your area.  

No prior research: Do extensive research before buying. Go beyond your friends and family, known agents, and local advertisements. Know how much to offer when bidding for a home, and even help you avoid purchasing the wrong house.

Ignoring commute time: Miscalculating the commute time can turn out to be a very costly mistake. Take that into consideration before deciding about the house.   Buying beyond your means: We discussed about affordability in the beginning. Make sure your house doesn't become a millstone around your neck. Choose wisely and stay financially viable even after becoming a homeowner.

Ignoring the surrounding: When you buy a home, you're also buying into the neighbors and a community around you. So if you find your dream house in a neighborhood you are not happy with then it may be useful to explore other options.

Letting the lenders decide your ability to buy: Note that you are the best judge of what you want and what you can afford. The lender will provide you a loan which is most profitable for him. Take lender's advice but you should be the person who takes the final decision.  

Choosing a home loan based on interest rate: As we have discussed earlier, a mortgage is a complicated product and interest rate is only one component of it. Our finance tools are the best place to start comparing products and find out what is best for you.  

Be a victim of initial teaser rate: If you decide to go with a variable rate product then beware of initial teaser rate. After the rate reset, EMI may jump several fold and beyond your means.  

Misrepresentation in submitted documents: All we will say is that this is illegal, so don't do it.  

Taking unconditional offers: Putting in an offer without any contingencies may seem like a hassle-free way to purchase a house but it can be dangerous. A contingency protects you if you have to back out of an offer. Without a contingency, you may be penalized should you have to break a contract and not follow through with the purchase. Among the contingencies you should think of adding to your contract are:  

  • Make your offer contingent on your ability to get mortgage financing.
  • Ask for the right to conduct a home inspection. This gives you the opportunity to ask the seller for fixes, or to back out of the contract should the home be in need of severe repair.
  • If you have a house you need to sell before your next home purchase, make the purchase of your next home contingent upon being able to sell the first.  

Not getting everything in writing: We live in a veritable legal jungle in which there are many predators. When it comes to buying a house, for that matter any business transaction, words and vague promises are useless. So it's best to obtain everything in writing and checked by a competent attorney.

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