Financial Mistakes to Avoid when Shopping for a New Home

Posted on Wednesday, July 1st, 2015 at 3:55am.

Prime Edmonton Real Estate - Buying a new home is a significant event in one's life. Shifting from renting a house to actually owning one can be overwhelming. Many people assume they know it all and are smart enough to deal with the financial part of the buying process. However, they tend to make mistakes that ushers an avalanche of financial problems on them.

If you are planning to buy a new home, then this guide will help you avoid mistakes that most people make when shopping for a new home:

Following are the mistakes to avoid:

  1. Treating the house like a short term investment:

Some people tend to buy houses for temporary living. Doing so is not a very good bet. This is because, the house value may or may not appreciate over time, since it is a large asset, and houses are not very liquid either. Suppose you buy a house where you will be living for, say 4 years, and then you plan to sell or put the house for rent. There's a possibility that you won't be able to recoup the transaction costs and may even stand to lose the money you put in for buying the house in the first place. 

  1. Not budgeting for the house:

Another common mistake that people make is assuming that mortgage will be affordable when compared to the rent. When you include all the hidden and additional costs, it's possible that you may not be able to afford the house. To avoid this, take a look at your income and expenses and see what and how much can you afford to pay comfortably for the next 15-30 years. Another thing to consider is the sudden changes of events in life, eg change of job, having children, which may affect your ability to pay the mortgage and other expenses on your home.

  1. Forgetting added costs

Just a comparison between rent and mortgage is not enough. There are many additional costs post purchase which must be considered before buying. Calculate these additional costs such as insurance, property taxes, maintenance fees, etc. Many homeowners are aware of these costs, but underestimate just how much they can be.

  1. Not clearing any past credit issues

A credit report tells how good you are at paying your bills on time. Lenders are only willing to give you a loan if you have a sound creditworthiness. Before buying the house, clear up any debts and lower the debt-to-income ratio. Once this is done, get your payments checked by agencies who make credit reports. Also check that there are no errors in the report, if so, write to the agency and provide proofs that support your argument. Even a minor error could land you in deep waters when applying for the loan.

Financial mistakes are not the only kind of mistakes people make before buying a house. To know what other goof-ups people make when buying the house, read the next guide.

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