Buying A House: Some More Problems To Watch Out For

[Jun 14, 2008.]

If you're considering buying a home, you're probably already worried about potential problems you might face. You've probably been inundated with friends and well-wishers and people who think they know what they're talking about telling you "what to watch out for." In all the confusion, you may become frightened.
Do not be: while there's no way to be prepared for every contingency when buying a home, outlined below are very clear traps to avoid. Steer clear of these problems, and you will probably do fine.

First, you, yourself, should choose the home inspector for the property you're buying. Don't trust your real estate agent to choose a professional home inspector for you. Think about it: it's in the real estate's agent's best interest to sell you the house. Maybe the professional he or she is recommending to you is a skilled and honest home inspector--or maybe that "professional" and the real estate agent have a tacit understanding. Maybe they're just working together to make sure that you buy that house, no matter what's wrong with it.

The best thing is to ask people who have actually recently bought a home for their recommendations. Interview more than one potential home inspector. Make sure the inspector belongs to the American Society of Home Inspectors, which actually has standards for its members (not many states actually have regulations about home inspection professionals). Also make sure the inspector has a license and insurance, and accompany them when they go to do their report on the home you're thinking about buying.

Also, be careful about taking your real estate agent's or your bank's advice about what you can and can't afford. They are going to pressure you to take out high-cost mortgages and loans. Maybe you will be able to "afford" paying them off--at the cost of accumulating enormous amounts of debt, or taking money from your retirement funds, or not being able to go on that Scuba vacation you've been dreaming about and saving for. You have to decide what you can and can't afford, and not someone who wants your money.

Another thing to watch out for is the adjustable-rate mortgages and interest-only mortgages that some lenders will want you to buy (on the basis that they may have lower payments). These can sometimes be a good idea, but remember: you don't know what the interest rate is going to be in the future. If you get an adjustable-rate mortgage now and the interest rate goes up, you'll not be saving any money at all.

Here's yet another potential problem: if buying a house is putting you under additional financial strain, it may be tempting to open a new credit account, or close an existing credit account. This is unwise, because, surprisingly enough, both of these actions can hurt your credit rating. Lenders use your credit rating to determine what kind of mortgages and interest rates they are willing to give you.

Something as simple as applying for a new credit card can adversely affect your credit score, which may prevent you from qualifying for the loan you want. Naturally, you may not be thinking about this as you apply for the credit card--but you will once you find out that your lender doesn't want to give you that advantageous mortgage anymore.