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Many people decide to go buy a new home using the "Ready. Fire. Aim!" method of planning. It's not surprising to learn, then, that many people also get frustrated during the home-buying process. Here are 4 common mistakes people make when buying a new home.
What's your Budget?
It always surprises us when we hear people are looking into buying a new home (either a newly constructed home or a resale home that's new to them) and they haven't yet talked with a lender about mortgage payments. We think it's a good idea to walk through the steps below to help understand how much house you can afford:
- How much do you feel comfortable spending each month on your mortgage? This figure should include your Principal and Interest mortgage payment, your monthly pro-ration for Property Taxes and Home Owners Insurance, any Mortgage Insurance the lender might require, AND any monthly allocation for Home Owners Association Dues.
- Next, talk with your lender to make sure you can qualify for the mortgage payment above. The lender will consider your income, credit history, down payment, other monthly expenses, and other factors to determine whether or not you'll qualify.
- Then the lender can translate your mortgage payment amount into a loan amount, based on the loan terms you choose and the current interest rate environment.
- Finally, now that you know the loan amount which will give you the highest monthly loan payment you're comfortable making, how much house can you buy?
Don't Blow the Budget
This happens to just about everyone (the people that don't know their budgets aren't aware of it!) Do you know anyone who has fallen into this scenario?
Mr. and Mrs. Buyer meet with a mortgage lender and determine that they qualify for and are comfortable making payments on a $270,000 mortgage. They're using the equity from their current house to make a $30,000 down payment, so they're buying a $300,000 house. Sounds good so far. Then they go to look at model homes, and discover they can have the nicest house in an OK community, or a smaller house in a GREAT community. Our buyers decide the neighborhood is very important, so they opt for the second community.
Next they walk through all the models and decide the $300K floor-plan is just a little bit too small - it makes perfect sense to buy the next larger house for $30,000 more. After all, this will be their home for a long time and they'll be able to grow into it.
Now they're very excited. They're in the perfect neighborhood. They're buying a great house. And the lot they like is available - fate must be telling them to sign the contract right now. So they sit down at the sales office to fill out the paperwork and checkmark a couple of options for their new home - nothing too extravagant, but they might as well have some things done now, right? Ceiling fans, upgraded tile and countertops, cabinets in the laundry room, extended patio, expanded garage - just a few things to make their home even more perfect.
Final tally - their home is now priced at $360,000 (or more!) And the couple is emotionally vested - they're so excited that they can't bring themselves to walk away. The trouble is that their payment is no longer comfortable, in fact they might not even qualify for it. They won't be able to furnish their home the way they'd like to. They won't be able to landscape the backyard (forget about adding a pool). And next summer's vacation might even be put on hold.
Suddenly the "perfect" house has put a big cramp in our happy couple's lifestyle.
Check Out Past Communities From the Builder
Sometimes the best way to get a feel for what the subdivision will look like in a few years is to visit a subdivision built by the same builder a few years ago. Look for one with a similar offering of models and floor-plans and a similar community set up (park, greenbelts, schools, etc.). Our experience has shown us that many of the builders' subdivisions have the same "feel" to them, regardless of what part of the city you're in or when they were built.
While you're out looking at past subdivisions, stop and talk to some of the home owners. What was the builder like at the closing table? How was the customer service during the warranty period? Was the house built well? Most home owners will be more than happy to either rant or rave - and you should beware of any rants.
Use a Realtor!
Your Realtor can provide a tremendous amount of value when you're shopping for a new home. Comparing communities, Property values, Area growth, Zoning issues, Former projects by that builder, knowledge of similar floor-plans and market trends, negotiating with the builders' one-sided contracts, Timing issues with selling/renting/moving your current house, Providing an independent 3rd party opinion who's not emotionally attached, and many more. There is so much information that a Realtor has access to, and past experience to draw from, that most home buyers just don't have.
Contact
The Butterworth Group
today to put our
Phoenix Real Estate
knowledge to work for you!
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