Here’s some good advice to help you avoid 5 costly mistakes first-time buyers make.
Buying a first home can be a daunting experience. Here are five common and costly mistakes that novice home buyers make:
1. Ignoring the costs of having a low credit score. Lower-score borrowers pay thousands of dollars in increased interest rates over the life of the loan.
2. Muddying the waters by shopping for other things before closing. Lenders continue to check credit scores right up until the time of closing. Too much shopping could cause the lender to take back the loan.
3. Scrimping on an inspection. Being surprised by the need for expensive repairs can be financially devastating.
4. Buying without contingencies. Buyers should give themselves an out if the inspection turns up problems or the bank raises the interest rates.
5. No money for insurance. Insurance can be surprisingly pricey. Buyers who don’t budget for it can face a nasty surprise.
Source: CNNMoney.com, Les Christie (04/19/2010)
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It’s best to be aware ahead of time of those “red flags” which might be stumbling blocks for getting financing. It is not unusual in today’s market to see a home for sale needing repairs or being sold “as is”. It generally occurs with foreclosures, estate sales, or with sellers who do not have funds for repairs. While it may be a great opportunity for buyers to create some sweat equity, there are “red flags” to look for. FHA and Rural Development (RD) loans have become very popular with first time home buyers. However, they have strict guidelines on the condition of the property and will not lend on it until it meets their guidelines. Here are some of the problem areas for FHA & RD loans that I’ve seen:
- If there is clear evidence of mold, an appraiser will make the appraisal subject to satisfactory mitigation – regardless of the type of loan.
- The well must be located 100’ away from the leach field. Unless the well has a state exception, it may require relocating the well or the leach field.
- Any safety items such as broken panes or missing stair railings must be fixed.
- Structural issues like leaky roofs, flaking paint (in or out), etc. must be addressed.
- Specific water tests are required depending on the loan. Dug wells are notorious for testing positive for coliform.
Knowing the “red flags” and preparing strategies to address them will bring buyers and sellers closer to a successful sale. Call me if you are looking for an agent to help strategize for your success!
Donna Forest, ABR
A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis. Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:
- Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
- Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
- Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
- Include a maintenance budget. Even new homes need upkeep and repairs.
- Buyers who can’t afford their dream home now should opt for a starter home where they can save money each month for what they really want.
- Consider a property that can be expanded and improved down the road when money is available.
- No two buyers are the same, but they should all feel confident with the load they enter into, no matter the size of the mortgage.
Source: The New York Times, Ron Lieber (09/12/2009) and NAR Realtor® Magazine