The real estate market is hardly predictable nor friendly. When the housing bubble burst, lenders went out of their way to grant mortgages to people with little to no savings deposit just so they can still earn. People bought discounted properties and thought it can be a start of something new, but little did they know that prices and interest rates would go up once more; and so, they will have to pay for the fees they didn’t sign up for in the beginning.
Preparing for the constant rise and fall of the real estate market does take skill and experience. With this, it is only logical to take the lessons that came with committing rookie mistakes and then move on. If you’re a first-time home buyer, you might want to be aware of these three (3) mistakes you should avoid.
- Overlooking the Importance of Saving Up Early
Many home buyers, particularly newly-weds and young couples, overlook the amount of money they could have saved had they started early on. Hence, when the time comes for getting a mortgage and they were asked to pay 30% of the property’s total value as down payment, they were left heartbroken because they could not afford it.
The rule of thumb is that put 20% of your net profit in your high-yield savings bank account. Save up until you’re ready, and keep in mind that interest rates are lower when you pay your down payment in full or higher than the asking price. Plus, this could help you avoid paying for that expensive private mortgage insurance.
- Going for a Single Lender; Shop Around!
While looking for multiple lenders is quite a daunting task, it is worth it in the long run. Talking to a handful of lenders and comparing their rates and prices will get you closer to the best deal possible for your needs. For instance, Homestart specialises in house and land packages in Perth, and being a specialist, they can offer first-time home buyers access to various real estate properties and loan products crucial for keeping the options competitive.
- Unpreparedness for Future Financial Problems
After settling down, some home owners just cannot find the motivation to prepare themselves financially they don’t know where to start. Imagine in the event of massive job lay-offs due to another financial crisis, how would you be able to keep up with your financial obligations? Surely, it doesn’t hurt to anticipate for the worst and you can possibly reduce the risk by setting up an emergency fund, paying off your debts, establish extra source of income, and by building up an impressive credit history.
Overall, the home buying process can only end up complicated if you have not prepared yourself well for it. Factors to keep in mind include the current interest rates, availability of the property you’re saving up for to buy some years later, loan options, and credit history.