Buying your first home is an expensive process. When you add up the down payment, various fees (loan application, credit report, notary, attorney, etc) and things you need to buy for your new home, such as appliances, you may be looking for ways to curb the outflow of money.
It can be tempting to skip anything that’s not necessary for the approval of the mortgage, but there are a few things you should always pay for. Though expensive, the following can save you a lot of money, and headaches, in the long run.
There’s a reason it’s no longer possible to buy a home without a down payment. As people across the country have learned, homes don’t necessarily appreciate in value year after year. If you buy a home without an adequate down payment, you could soon find yourself upside-down in your mortgage. If something happens and you need to sell quickly, you won’t be able to.
It’s best to put at least 20% down. That gives you the advantage of not having to pay for Private Mortgage Insurance to protect your lender against a default on the loan.
It’s tempting to skip the expensive home inspection, believing that you will be able to see any big problems in the home. Don’t do it. Many problems cannot be seen with the naked eye, and an experienced home inspector will be able to point out potentially financially devastating problems. It’s better to spend the money on the inspection than to find out your home needs a new foundation six months down the road.
When you buy a home, you want to make sure that you (and your lender) own the deed, free and clear. As part of the home buying process, a title search will be done to make sure there are no problems or liens against the property.
As with any process, though, human error can cause significant problems if there’s an oversight. Title insurance will protect you in the event that something isn’t recorded correctly or someone challenges your right to the property.
Many people do not realize that standard home insurance does not include flood insurance. If your new home is in a flood plain, your lender will require that you buy flood insurance.
Even if you don’t live in a flood plain, though, it might be worthwhile to take out a flood policy. As people in Oklahoma City recently discovered, floods can hit quickly, even in areas outside of flood plains. If your home isn’t in a high hazard area, flood insurance won’t be that expensive and it’s well worth it should a flood actually happen.
Buying a home is an exciting process. Make sure your excitement doesn’t turn to regret. Spend a little extra money on things that will protect you in the long run.