Once you are on your way to homeownership there are certain precautions you will want to take to further minimize your risks. Here are some tips to make your buying experience a more positive one:
Know what you are paying for upfront. Throughout the mortgage lending process, you will be faced with a list of fees. From origination and escrow fees, to title insurance and property taxes, some may seem inflated while others fall in line with your expectations. You should always question a fee you are uncertain about.
Try to avoid an early pre-payment penalty. Everyone wants to have the flexibility of paying off their 30 or 40 year mortgage early or refinancing when rates go down. The reward is not only owning your house outright but saving on interest charges. Work with a lender who is willing to waive any pre-payment penalties or can offer you the ability to refinance your mortgage at a better rate.
Watch out for the classic bait-and-switch. A lender may try to reel you in with low interest rates, no money down, or no closing costs, only to inform you that you have a less than perfect FICO score. If you feel you are not getting the best rate and loan options, look for a lender you feel more comfortable with.
Don't let real estate agents pressure you to buy. Real estate agents are motivated to sell homes in order to earn a commission. They may convince you the property meets your needs, but you should make the decision without feeling pressured. Remember, the real estate agent works for you and has a fiduciary responsibility to protect your best interests. Always comparison shop for the best rates and programs.
Buy only what you can afford. Stay within your debt-to-income ratios and this can help prevent you from over-extending your debt. Compare mortgage rates and, if necessary, use an affordability calculators to determine the minimum and maximum amount you can afford before going house hunting and stick with your estimate.
Never buy a home on impulse. At some point during your search for a home you may decide to settle for less or get caught up in a bidding war for a house you do not necessarily want to buy. Staying within your budget can be a real challenge, especially if a lender approves you for a higher loan amount then you feel comfortable with. Give yourself time to think about your options and walk away if you feel it is a questionable deal and see how you feel about it the next day.