Buying your first home is probably the biggest and most important purchase you’ll ever make; because in addition to satisfying a great emotional effect, it is also an excellent investment.
Before buying a house, it is normal to think about the children, about whether the place really offers you the quality of life that you so desire, and of course about the payment of the credit.
They are all important decisions; but if you really want to make a good purchase, our first recommendation is that you leave the emotional part aside for a moment, so you can think intelligently, and pay close attention to not making the following 5 mistakes.
5 mistakes you should not make when buying a house
The frequent thing when buying a house is that it is done through a loan, for this reason it is important that you have knowledge of basic aspects that can be overlooked, and that undoubtedly generate large losses of money.
1. Not doing the calculation of what you can pay
You must be realistic when buying a house; making a budget that takes into account your income and expenses will allow you to know what is the cost that you can cover monthly, so it is the first thing you should do before making the purchase.
In addition, it is important that you focus on the mortgage that you can afford and not the one that the bank qualifies you for. In the same way, you must take into account the additional expenses that buying a house brings with it, such as: payment for taxes and property insurance, as well as the cost of services; all should be included in your budget.
In general, our recommendation is that you follow the 30% rule; it means that the monthly payment of the mortgage of the house must not exceed 30% of monthly available income (money free of expenses).
2. Not checking your credit
Starting the process and falling in love with the house before seeing what loan they can offer you is a fairly common mistake.
The bank when making a loan is going to look mainly at the credit history and the credit score. For this reason you have to know your credit score, because if it is very low it will generate a higher interest rate.
In this sense, we suggest that you focus on your credit score being greater than 720, since the higher it is, the lower your interest rate will be and it will allow you to make a better negotiation with the bank.
If you are not yet in this score, here I share this video so you can learn how to raise your credit score before you buy a house.++
On the other hand, banks will monitor your credit before and after closing the purchase, so you should take care of your credit by avoiding other loans for unnecessary purchases.
3. Not understanding the mortgage
Not being well informed about mortgage rates is a mistake that can cost you a lot of money; Although mortgages are a huge and complicated market, it can be understood in a simplified way that there are three types: fixed interest, variable interest and hybrid.
They also vary in the term to make the payment, the most frequent being 30 years, we will explain it as follows:
Mortgage with a fixed interest rate: it will be the same monthly payment for the duration of the mortgage; It usually has a low interest rate. It is the most convenient, because it allows you to plan each month.
Variable Rate Mortgage: You can have a 5-year, 7-year, or 10-year fixed rate and then switch to variable rates. With this type of mortgage you have no control over how much the monthly interest could be.
The latter can be very tempting, because it generally has the lowest interest rates the first few years; but then they can be fired to such an extent that you can lose the house. Therefore, you must know how to differentiate them.
4. Not giving the 20% down payment
If you don’t have a 20% down payment, chances are it’s not the time to buy a house. Contributing 20% of the house is a good financial habit, since the more you down payment, the less interest you will pay.
Do not trust the mortgages that allow you to buy the house with only a 5% down payment or without it; Although it seems attractive, it will only bring you problems, such as needing additional insurance called PMI, which will make you spend a lot of money.
5. Do not negotiate
It is the most important for us; Not negotiating the price is clearly a mistake that can be very expensive.
Currently, the real estate market has entered a cycle that gives the buyer all the power to negotiate, called the buyers’ market. That is why we suggest that you always negotiate everything related to the purchase of your house, and do it wisely. The important thing here is that you negotiate everything that can favor your finances.