Aug 7, 2013

Budgeting Mistakes to Avoid While Buying a Home for the First Time

Buying a home for the first time is an occasion too big to not feel butterflies fluttering in one’s stomach.  The amount of money at stake is simply mind boggling and therefore it is advised to be thorough with every detail of the deal to ensure a happy ending.  Not many get a second chance. Here is a post detailing the very mistakes one must avoid committing.

Buying a home in one of the best locations is a dream that everyone would like to fulfill at least once in his or her lifetime. Those who are able to accomplish the same are considered lucky by themselves as well as others. However, consider a situation when you had the best of opportunities to achieve this dream and by your own minor error of judgment you aren’t able to close in on the deal the way you would have want to. Not only will it stick like a sore thumb, the thought of getting so close and yet not through will haunt you for the rest of your life. It is better to be prepared than to repent later and therefore, this post will serve you as a primer on the important things to take note of while investing in real estate and more importantly avoiding the mistakes that can turn a sweet deal into a sour one.

Not considering the hidden costs while buying the home

This is the most common and annoying of all the budgeting mistakes, justifying why it has been listed above all. Most first time home buyers have a figure in mind that heavily discounts on the complete costs of ownership, excluding common fees like appraisal fee, notary fee, escrow fee, which when combined can make a sizeable amount of money. These all are the closing costs, which, if not included from very early on can make you house poor, where you will have spent so much on just buying the home that you wouldn’t have much left to afford the other expenditures that follow.

Ignoring a bad credit report

Your credit report is the first thing that a bank official would check before signing on the approval form of your home loan, and if it doesn’t looks right it will also be probably the last thing to be checked. Most people underestimate the importance of credit report.  However, not only a decent credit report will help the finance company speed track the approval of mortgage, but might also help you get a lower interest rate on your mortgage. You can yourself check the health of your credit report through an official website.  A bad credit report notwithstanding, an even worse condition would be to have no credit history at all.

Not considering home resale value

As a first time home buyer the selling value of your house, which you haven’t even bought till now is certainly not one of your first considerations. In spite of all your intentions to spend a lifetime in the newly bought home, there might be a situation when you are forced to move out to a different place, or who knows you might get an even better pad to live on, and in such condition selling the existing one is only a just and reasonable thing to do. Home buying is essentially an investment, albeit a long term one and therefore, it is essential that you make your moves while considering what others also think about your home, in addition to what you yourself think.

Not budgeting for the home loan

Majority of the mere mortals have banks and other finance companies for their homes. If it had not been for their mortgages and home loans, buying a new property would have remained the privilege that few would have enjoyed.  Not making a budget that takes into account your monthly down payments is a disaster. The easiest way to stay in clear is make a complete list of what your existing income and expenses are and then making an easy comparison.  Many first home buyers do not go through the ordeal of this budgeting and consider their rents as equivalent to the monthly EMIs, making a decision in haste, only to regret it later on. 

Author Bio: Delhi born Saurabh Tyagi has a penchant for writing, which he discovered early on in life. He likes to put pen to paper every now and then for topics such as properties in Kochi, serviced apartments for sale and commercial real estate Noida. Currently he writes on behalf of, a leading real estate site.
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