*A home is likely one of the largest purchases you will make in your lifetime, and home ownership may help you build wealth if you own the home for the long term.
Whether you’re purchasing your first home, or an additional investment property, following are a few common mistakes to avoid that may help make the home buying and home ownership process a little smoother:
Paying 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 thorough 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.
Not budgeting 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 carefully researching 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 creditÂ
A home equity line of credit (or HELOC) 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.
As the money is repaid, it becomes available for you to use again. Borrowers may be able to take a tax deduction on the interest from the credit line. A HELOC 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.
Most HELOCs have variable interest rates so as baseline rates go up, you may experience payment increases. It may be tempting to spend more than you can afford if you open a large line of credit, but avoid borrowing more money than you need.
This article reflects the thoughts and opinions of the author and is being provided for educational and informational purposes only. It should not be considered financial or tax advice. Â Please consult your financial or tax advisor about your situation.
Armando Ortiz is a mortgage consultant with Union Bank in the Greater Chino Hills, CA region. MUFG Union Bank, N.A., is a full-service bank with offices across the United States. We provide a wide spectrum of corporate, commercial and retail banking and wealth management solutions to meet the needs of customers.
We also offer an extensive portfolio of value-added solutions for customers, including investment banking, personal and corporate trust, global custody, transaction banking, capital markets, and other services.
With assets of $113.5 billion, as of June 30, 2015, MUFG Union Bank has strong capital reserves, credit ratings and capital ratios relative to peer banks.
MUFG Union Bank is a proud member of the Mitsubishi UFJ Financial Group (NYSE: MTU), one of the world’s largest financial organizations with total assets of approximately ¥286.1 trillion (JPY) or $2.4 trillion (USD)¹, as of March 31, 2015.
The corporate headquarters (principal executive office) for MUFG Americas Holdings Corporation, which is the financial holding company and MUFG Union Bank, is in New York City. The main banking office of MUFG Union Bank is in San Francisco, California. Equal Housing Lender.
source:
Sherice Bellamy
shericebellamy@
We Publish News 24/7. Don’t Miss A Story. Click HERE to SUBSCRIBE to Our Newsletter Now!
