When buying a new home, it’s easy to fall into the trap of spending too much money. To avoid this, you must have plenty of discipline. At the same time, you can’t worry too much as you want to buy the right house for your family. With this in mind, here are the top 10 money traps to avoid when buying a new home.
1. Bad movers: Be sure to shop around for your moving company – prices and services can vary greatly. For quality be sure to check their Yelp and Better Business reports. For your peace of mind – these guys are moving your most precious belongings – be sure to check their insurance and note what is and what is not covered.
2. Expensive home furnishings: While we all want a nice home to come to, you should not fill it with expensive furniture right away. Before spending a fortune on the furnishings consider the possibility of using that money to upgrade the home first which will add value to the property.
3. Buying for future income: Your lender should do a good job of helping you understand how much mortgage, and thereby how much house you can afford. California Mortgage Advisors, Inc. is prepared to walk you through the monthly expenses associated with owning a home and help you know just the right price for you.
4. Small down payment: While it’s nice to pay nothing when you move into a home, a smaller down payment may result in higher rates, PMI and ultimately a higher monthly mortgage expense. Lenders like to see borrowers who have more “skin in the game” in addition to demonstrated ability to save. Check with our licensed professional Mortgage Advisors for solid advice on down payments and the lending process.
5. Not having an emergency fund: When buying a place, you are going to run into problems. Whether you have to replace the water heater or buy new appliances, you will want to pay this cost out of pocket as you don’t want to go into more debt. Remember that when underwriting your loan the lender always looks to make sure you have adequate reserves.
6. Not having enough insurance: If you have a house, you are one issue away from dealing with a lot of problems. But, with the right insurance, a homeowner can avoid financial problems should an emergency arise. Shop around – coverage and cost vary greatly.
7. Buying too big: While a lot of people buy houses that are too expensive, others buy houses that are too big. Not only will this cost more money, but it will hurt you in other ways as you will have higher maintenance costs, and you will also have to furnish more space.
8. Forgetting about other expenses: Some homeowners forget about other expenses. Not only will you have insurance, but you will have to furnish your house and pay the electric bill and more. Your CMA Mortgage Advisor will be gladly outline both the expenses that will be used when underwriting your loan, as well as help you think of expenses and how they will impact you in the future.
9. Thinking you can fix a place up on the cheap: Sadly, if you buy a house and think you can fix it up without spending much money, you are mistaken. Not only will you have to pay permit fees, but you will have to buy supplies and hire workers. Get estimates from licensed contractors prior to closing escrow on your new home. This way you will know exactly what you are getting into as far as cost.
10. Getting too emotional: Believe it or not, some people get too emotional in the buying process. Instead, you have to look at the numbers and see that it, in fact, makes sense. Remember, you should think of this as a business transaction.
If you can avoid these 10 money traps when buying your home, you will avoid a lot of the traps that others fall into when buying a home and be happier in the long run. Our Mortgage Advisors are available at (800) 927-6560 to answer your questions or click here to contact us online.