Why and how to be extra careful when buying a home
Buying a home is a giant leap that we all take in our life. While most people save for it all their life and buy their dream home in their late 30s, many invest in a property as soon as they start working. However, there is no right age to take the plunge as long as you are sure that you are financially ready to make a huge commitment and over the age of 18.
Did you know that the average age of homebuyers worldwide is currently 34-years-old and around 27 percent of the homebuyers are under the age of 25? However, there is no upper limit or age when you can consider it too old to invest in a new home. So, no matter how old you are, you should take pride in the fact that you are investing in a property.
While buying a home is great news, there needs to be a few points that you should keep in mind to avoid turning this into a spell of bad news. And this applies to both first-time homeowners and otherwise. So, what are the points of caution that you should exercise while buying a home? How and why should you be careful when investing in a property? Read on to find out!
Understand The Costs
The percentage of people who buy a home without a mortgage is almost negligible worldwide. While it is a great feeling to know that you bought every bit of that house with the money you had on hand and did not have to borrow from a lender or a bank, it isn't easy. So, there is nothing wrong if you are planning on taking a loan to buy your dream home. In fact, that makes you a part of the majority of homeowners and not an anomaly.
However, there are numerous factors that you need to take into consideration before applying for a home loan, and the primary factor is the mortgage that you will have to pay every month.
While it is important to pay out any money you owe as early as possible, it shouldn't leave you bankrupt. So, make sure you use a mortgage cost calculator to understand the interest rate, monthly payments, and duration of repayment for your loan. This would give you a clear picture and help you understand how much money you would have on hand after paying out your installments and interest every month.
Financial Readiness
You would realize this as you work your way through the mortgage calculation and the whole paying for the property part of the conversation. While it is important to have a place to call home, it shouldn't come at the cost of impacting your life. Buying a house could be the biggest financial commitment you would make in your life. So, you should make sure you consider your current financial standing, your plans in terms of career, the possible money you would be making in the future, other major expenses that might come your way, your plans for this house, etc.
If you are taking out a mortgage for 30 years but do not see yourself living in the same house ten years from now, it would not be a wise decision. So, make sure you see your future in this home. However, this does not mean that you should invest in a villa while you can only afford a studio apartment. While it is important to think about your future and only then invest, it is important to ensure your financial status supports it too. So, if you want to own a bigger house a few years from now but cannot afford the investment at this point, wait for a few months until you are ready with the savings. That way, you can be sure that you are financially ready and secure while taking this big plunge.
Realtor's Profile
This should technically be step one when you go house hunting or decide to buy a home. You need to ensure that your realtor has the licenses required to practice and is trustworthy. Most people hesitate at the thought of buying a home through a realtor because they believe that it could increase the property's cost or that the realtor might convince them to buy a home that might not be the perfect fit for them. However, remember that the seller needs to pay the realtors commission and not you as a buyer. Besides that, when realtors take up a property, they ensure that it passes all the safety inspections and tests because their reputation would be at stake if something goes wrong.
However, this is only the case if you are hiring the services of a reliable realtor. To be sure that you are using the services of someone who places your best interest first, you could explore their profile online, get recommendations from peers, and go through customer reviews. This would ensure that you are hiring someone who would find you the best home and negotiate the prices to work in your favor. Remember, there is no harm in trying out the services of multiple realtors because a home is a huge investment and not a purchase to have buyer's remorse!
The Fine Print
All the excitement of owning your dream home is beyond what words can fathom. And it is only natural to be eager to sign on the dotted line and become the "owner" of the property, a place you have invested all your savings into. However, this is a common mistake that most homebuyers make. They are curious to get the keys to their dream home that they forget to read the fine print in the documents they sign. And that is where most of the hidden clauses, charges, and liabilities are mentioned. When you sign the document, you are agreeing to everything that is there on the paper and can be held responsible for things you didn't know existed in the first place.
So, always make it a habit to stop, read through the fine print, ask questions, and have a legal professional read it before you sign. Remember, you are putting your entire fortune and your future into this property, so you have every right to take your time into understanding everything that is on the paper before you agree to it. And if the seller or the realtor is not willing to give you that time and you are being rushed into signing while the clock is ticking, that is a red flag. Reading through the fine print would give you a clear and strong understanding of everything from the closing charges, payment cycles, the penalties, and so on, all of which might burn a hole in your pocket!
The Loan Duration
Most of us have heard of the 30-year-plan for mortgages and think that it is the standard and the only available option. However, this cannot be far from the truth. Your home loan could be for something as short as five or ten years, too, if that's what you want. The reason most lenders pitch for the 30-year-plan is that you would end up with a higher interest rate, while it convinces you that the monthly EMI would be relatively less if you were to opt for a longer tenure.
However, if you have the funds to make a solid downpayment and meet the closing expenses, you could land yourself a loan at a cheaper rate of interest. And if your loan tenure is shorter, it only adds to reducing your interest rate further as you would be clearing out the debts in a short time. Besides that, your savings would be lower if your loan tenure is for a longer period. So, if this home investment is to save on taxes, it would be wise to go for a short-term loan.
Before buying a house, make sure you take into account all the above-mentioned factors. Besides that, you should also evaluate the market trends, the location of the property, the age of the house, the reason why someone is selling the property, and the mortgage rate. That way, you can be completely sure that you do not commit any of the common mistakes that homebuyers commit and end up regretting the decision.
Remember that while it is great to be a homeowner by the time you are 35, there is no hard and fast rule that says that you should! So, do not commit to property or buy a home just because your peers are doing so or it is expected of you. Similarly, you do not have to buy the home just because the seller or the realtor seemed convincing, and you feel the pressure to buy. This is a decision that would impact your future significantly. It is important to make an objective decision, keeping in mind all the aspects of your life it would impact. That way, your new home would be a place of joy, celebration, and good news alone!
