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Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make

Updated on May 26, 2009

House buyers, especially first timers have a tendency to fall into one or more of these traps which will end up costing them a lot of money over the term of the Mortgage. Here is a guide to avoiding those nasty Gotchas!

1) Overbuying

There is no point going out and looking at $500,000 houses if you can only afford $1,000 a month in mortgage payment. You have to work backwards from your income to determine the price range you can afford. The old standard of 25% of your total income has gone out the window, with some people committing to 50% or more. That is extremely foolhardy as it does not leave you enough money for all your other monthly expenses like taxes, food and fuel. A trusted Mortgage professional can determine according to your total income what is the range of loan you can qualify for and legitimately pay back. Getting pre-approved for a Mortgage is fast, easy, costs nothing and you are under no obligation to get a loan from them or anyone else.

2) Not understanding prepayment penalties and frequency options

It is difficult to believe, but a $1,600 monthly payment if switched with a $400 weekly payment is going to take entire years off your Mortgage term. The more frequent the payment, the less the interest paid. Unless you get paid monthly and you are so broke you can't afford the cushion in your bank account, you should go for the most frequent payment your lender will allow. You should also negotiate as open a Mortgage as possible. Chipping in a few thousand dollars here and there when you happen to be a bit flush is also going to have a dramatic effect on the total interest and term.

3) Not knowing if the Mortgage is portable or assumable

Some states allow your Mortgage to be portable, so you can just take it with you when you buy your next house. The advantages are enormous as you can save yourself a small fortune in discharge fees, the hassles of getting a new loan, etc. An assumable Mortgage is a type that the buyer of your current home can just take over. They just walk in and keep making the payments. This can be an strong negotiation tool which can really get the attention of a buyer.

4) Not thinking long-term

Everyone thinks that they're going to live in that next house until they're old, but it rarely happens that way. People get transferred, they move upmarket, they move downmarket, etc. Make sure that the Mortgage you're signing for is flexible enough that it won't smother you with discharge and other fees when it comes time to move. You should also check what the experts are saying about the forecast for interest rates. You don't want to get on the wrong side of those estimates or it can cost you many thousands of dollars.

5) Using the Seller's Agent

You drive by a house, call the number on the sign and deal with a charming, professional and very capable agent... who represents the seller! Always have an agent that you know and can trust to deal with the seller's agent and let them split the commission between them, as when push comes to shove, the seller's agent is always going to take the seller's side against the buyer, and that's where you lose!

Read The Entire Survival Guide

Home Buyer's Recession Survival Guide - The Subprime Meltdown
Home Buyer's Recession Survival Guide - The Advantage Of Renting Over Buying
Home Buyer's Recession Survival Guide - Why Rent? Why Not?
Home Buyer's Recession Survival Guide - Five Common Mistakes House Buyers Make
Home Buyer's Recession Survival Guide - Get Your Home Sold Quickly & At Your Asking Price
Home Buyer's Recession Survival Guide - Improve Your Home's Value And Sell It For More!
Home Buyer's Recession Survival Guide - Learn The Value Of Curb Appeal
Home Buyer's Recession Survival Guide - Home Staging: Valid Selling Technique Or Fraud?
Home Buyer's Recession Survival Guide - Before You Go House Shopping
Home Buyer's Recession Survival Guide - The Home Condition Checklist
Home Buyer's Recession Survival Guide - Getting A Mortgage From Different Types Of Lenders
Home Buyer's Recession Survival Guide - What To Do After You're Turned Down
Home Buyer's Recession Survival Guide - New Initiatives To Help Get You Approved
Home Buyer's Recession Survival Guide - Isn't HUD An Old Paul Newman Movie?
Home Buyer's Recession Survival Guide - Jumbo Isn't As Huge As He Once Was
Home Buyer's Recession Survival Guide - FHA Q&A
Home Buyer's Recession Survival Guide - The FHA's Credit Requirements Vs. The Bank's
Home Buyer's Recession Survival Guide - Your Credit Score And Your Mortgage
Home Buyer's Recession Survival Guide - Credit Score Confusion
Home Buyer's Recession Survival Guide - Keeping That Credit Score Nice & High
Home Buyer's Recession Survival Guide - Minimize The Interest Payable
Home Buyer's Recession Survival Guide - What Is PMI & Why Do I Care?
Home Buyer's Recession Survival Guide - The LIBOR-COFI-COSI Alphabet Soup
Home Buyer's Recession Survival Guide - REO: Get Rich Quick Or Just Waste Time?
Home Buyer's Recession Survival Guide - Obtaining Flipping Money
Home Buyer's Recession Survival Guide - Consider The Additional Costs
Home Buyer's Recession Survival Guide - What Is Escrow?
Home Buyer's Recession Survival Guide - Tips To Avoid Foreclosure
Home Buyer's Recession Survival Guide - The Changing Value Of Your Mortgage Dollar
Home Buyer's Recession Survival Guide - How To Ride The Interest Rate Spikes
Home Buyer's Recession Survival Guide - Can't Get A Mortgage? What A PITI!
Home Buyer's Recession Survival Guide - Calculating Your Closing Costs
Home Buyer's Recession Survival Guide - Mortgage Broker or Mortgage Banker?
Home Buyer's Recession Survival Guide - The Magic Of A Down Payment
Home Buyer's Recession Survival Guide - A Refinance Checklist
Home Buyer's Recession Survival Guide - Refinancing With Bad Credit
Home Buyer's Recession Survival Guide - The Self-Employed Mortgage Maze
Home Buyer's Recession Survival Guide - VA Loans
Home Buyer's Recession Survival Guide - Offset & Reverse Mortgages
Home Buyer's Recession Survival Guide - The Reasons To Not Buy An Offshore Retirement House
Home Buyer's Recession Survival Guide - How To Pay Less Than $500 A Month
Home Buyer's Recession Survival Guide - Five Easy And Cheap Tips To Save Big $ On Energy

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