DON’T PAY MORE THAN YOU CAN AFFORD
Save enough for a down payment and resist the temptation to go to the edge of affordability. The more money you are able to put toward your down payment, the more equity you will have in your home and the lower your mortgage payments will be. A meeting with your banker or mortgage lender can help you determine how much you can afford to spend each month on a mortgage payment, and how much cash you will need for closing costs.
SKIPPING A HOME INSPECTION
Before buying a home or other property, hire an inspector, preferably an engineer familiar with the area where you are buying, to take a close look at the condition of the home. A home inspection may uncover problems with the foundation, electrical, plumbing, roof, attic insulation, and heating and air conditioning.
It is important to address potential problems that could require costly repairs down the road. Ask your realtor for inspector referrals or contact the American Society of Home Inspectors (ASHI) at www.ashi.com to find an inspector who can conduct a thorough inspection. Also consider inspecting for pests and other conditions, such as mold, lead and asbestos.
FORGETTING TO BUDGET FOR MAINTENANCE, REPAIRS OR EMERGENCIES
Establish a budget that includes money for repairs and regular maintenance, and set aside extra for emergency situations, such as a medical emergency, job loss or natural disaster. Experts recommend saving at least six months’ worth of living expenses to help handle unforeseen expenses or in the event of an emergency.
NOT FACTORING IN INSURANCE COSTS
Insurance costs will be an important expense to add to your budget and can vary greatly depending on the location of the property, the type of property, age of the property, etc. Research what it will cost to insure the property and determine exactly what is covered. Standard policies usually pay for theft and wind, fire, lightning, hail and explosion damage, but if the house or property is located in a flood plain or a high risk area for earthquakes, coverage could be more costly.
MISUSING HOME EQUITY LINES OF CREDIT
A home equity line of credit is a method of borrowing money that allows a homeowner to borrow against their home equity. It differs from a standard loan in that the borrowing may be done over a period of time, and interest is paid only on the amount of money withdrawn. A home ownership line of credit can be a useful financing tool to pay for expensive home repairs or even a college education, but it is important to use it wisely.