Before You Join the Home Buying Boom…

The National Association of Realtors reports that pending homes sales have now risen to the highest level in nine years, and that buyers, on average, are paying more for those homes.

Since real estate is a driving force in the economy, this is good news.

If you’re about to join in, especially as a first-time buyer, beware of these three common buying errors:

1.       Failure to calculate all the costs

Buyers can get so caught up in the excitement of buying a home that they don’t pay attention to all of the costs. They focus only on the down payment and the monthly payment when calculating what their budgets will allow.

In addition to the down payment, buyers have closing costs. Sometimes their agents will have helped them negotiate for the seller to pay some of all of those costs, but in a hot market, many sellers are saying “No.”

Depending upon the lender and the loan program, closing costs can add up to 3% of the mortgage balance to the dollars needed to close.

Next, eager buyers often forget that the monthly payment doesn’t just consist of principal and interest. After that there are property taxes, homeowner’s insurance, and in some cases, homeowner’s association and/or maintenance fees. When buying with less than a 20% down payment, mortgage insurance will also be added to the monthly payment.

It’s best to be pre-approved for a mortgage loan prior to house hunting – and to have your lender estimate those additional costs before telling you a price that you must not go beyond.

It’s also a good idea to look at your own budget and think about how you like to spend money. Your lender doesn’t know if you love to go to concerts or want to send your child to a private school.  Do your own calculations and decide how much you want to spend on that monthly payment, then ask your lender to calculate what you can afford to spend on your new home.

2.       Buying based on emotion

Yes, you do need to really like a house you choose to buy, but getting emotionally attached and deciding that you just HAVE to have that house can cause you to overspend. It can also cause you to buy a house that’s simply wrong for you.

Before you shop, make a list of the benefits and features you must have, beginning with location. That might include a school district, a short or easy commute to work, proximity to medical facilities, etc. We’ve seen many people regret their choice because they fell in love with a view or a specific feature of a house.

Once you’ve determined a location, go on to other items of importance, listing them in order of priority. Your list may include a minimum number of bedrooms or baths, a gourmet kitchen, room for a grand piano, a home office, or a 3-car garage to be built by the best garage builder of that area.

If any of those items are absolute necessities, tell your agent – and don’t look at houses without them. Once you’ve identified the “musts,” list the “nice-to-have’s” and give that list to your agent as well. Learn more ways of avoiding “emotional purchases.”

3.       Failure to consider the future

First, be sure to get a thorough inspection before you commit to the purchase. While everything might look fine at the moment, a competent inspector will alert you to costs that may be looming within the next year or two. You might want to purchase the house anyway – but knowing that you’ll soon need to replace a water heater or a furnace will alert you to begin putting away the funds to do so. See here how to do it properly.

Second, think about resale.

When you purchase a house you aren’t generally thinking about the day when you’ll want to sell it, but that should be in the back of your mind as you purchase, and as you live in the house.

Will this house require extensive upgrades? If so, does today’s price reflect that?

Will you want upgrades that are beyond the norm for the neighborhood? If so, you more than likely won’t recoup those costs. You might be better off looking in a neighborhood whose homes are more in keeping with your own tastes.

We’ll be glad to help…  

Here at Clover Mortgage we can’t help you find that house, but we’ll be glad to get you pre-approved and show you just what you can afford before you begin the search.

Reach us by phone at 1-800-232-7409 or apply on line at http://www.mikeclover.com. And remember, we’re now serving clients in both Texas and Washington State.

Mike Clover

Mortgage Banker

Homewood Mortgage,LLC

O: 469.621.8484

C: 469.438.5587

F: 972.767.4370

18170 Dallas Parkway

Ste. 304

Dallas, TX 75287

NMLS# 234770