With interest rates continuing to hover near historic lows, there’s no time like the present to buy a home in Ann Arbor, MI. However, interest rates aren’t the only consideration. You want to be sure you are in the right position to buy a home and don’t wind up making one of the most common home-buying mistakes. Here are some mistakes you should avoid this year:
1.Don’t Break the Bank
Most people who go house shopping get fixated on how much of a monthly payment they can afford. But many of those same people forget to account for other costs. Your mortgage payment consists of more than just the principal and interest on the loan. You also have to pay insurance and taxes, as well as mortgage insurance if you don’t put down 20 percent.
Before going house shopping, get pre-approved for a mortgage. This will give you a good idea of what you can afford. Consider whatever amount the bank is willing to finance to be the absolute maximum you can spend.
2. Don’t Forget about Other Costs
The costs of a house don’t stop with the check you mail to the bank every month. Before you can close on the loan there are closing costs for things such as an appraisal, an inspection, a credit check, and a loan origination fee. These usually total 2 percent or more of your loan. And once you start living in your house you will have ongoing costs for repairs and maintenance.
To account for these costs, make sure you have extra money besides your down payment as well as extra room in your monthly budget to deal with home-related contingencies.
3. Make Sure You Understand Your Real Estate Contract
If you want the appliances or window treatments to stay in the house you are buying, get it in writing. Also make sure you understand when the closing is scheduled and what will happen if the sale falls through.
4. Don’t Overspend on Furnishings
Buying a new house is exciting, and you will surely want to make it as comfortable as possible. But you need to resist the temptation to bust your budget on new furnishings and major remodeling. Borrowing a bunch of money to pay for these things could put you in financial straits and also put your credit score at risk if your debt level rises too high. Stick to simple inexpensive changes such as painting rooms new colors or using slipcovers on your old furniture if it doesn’t match your new decor. Save up for bigger changes to make later.
5. Don’t Buy if You Aren’t Settled
If you think there’s a chance you might have to move in the next couple of years, you should resist the temptation to buy. Unlike the early 2000’s, when people were flipping homes in a month or two and getting double-digit returns, if you try to sell a house now after a year or two, you’d be lucky to break even.
Buying a Home in Ann Arbor, MI
Buying a house is likely the biggest investment you will ever make, so you don’t want to mess it up. Do your homework and get your finances in order so you make the right decision.