Buying a house or a department is an adventure. Good or bad, but an adventure.
Although the real estate market in each country has its own peculiarities, the precautions that need to be taken before closing the purchase are similar.
Is that the same mistakes are repeated over and over again because the process implies decisions in each of its stages, from defining how much you can really pay, what is convenient for you or what is the best mortgage credit.
What is the first trap the buyers usually fall into? Calculate the limit of your monthly budget.
It is a real trap because as it seems something so simple to do, it is easy to make mistakes. And the “30% rule” that experts recommend is not even so well known.
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These are some of the mistakes we should avoid before we close a contract.
1.30% Rule
The 30% rule is to calculate that the monthly amount that you will pay the bank for the mortgage credit and avoid that exceeds 30% of your disposable income.
Easy? Well, it’s not. The mistake is to think that 30% refers to 30% of your monthly salary.
The 30% rule is not calculated on your salary, as many buyers usually do. In fact, 30% should be calculated on the money available in your pocket, after paying other debts, such as the education of children or an automobile loan.
Just when you discount those payments, you can calculate that the monthly mortgage payment does not exceed 30% of your budget.
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“We have to be realistic about the ability to pay,” says BBC Mundo Mario Di Costanzo, financial consultant and former President of the National Commission for the Protection and defense of users of Financial services (CONDUSEF) of Mexico.
2. Initial payment too low
For the one who buys for the first time, the hardest thing is to raise money for the initial payment, the “hitch” or “foot”.
The idea is to give the highest possible entrance, so that the debt with the bank is as small as possible.
But in reality, as it is difficult to put together a quarter or a third of the value of housing, banks offer many alternatives that are not recommended.
Be careful with the offers that say “buy without deposit”. For example, give a lower deposit of 5% or 10% of the value of the property. The bank is good for you because you’ll pay more interest.
There are even countries where advertising seduces you with messages like “buy without deposit”. In these cases, banks include the value of the deposit in the mortgage credit, with a higher interest rate.
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Or they offer you a second credit (this time a consumer credit) so you can give a deposit.
It sounds great because you can own it without having any savings.
But it may be a mistake, say the experts, because you end up paying stratospheric interests that in the long run can put you against the sword and the wall.
3. Do not include the transaction costs in the credit
The buyer has to assume the costs of the transaction and the establishment of the mortgage, which are usually notarial expenses, taxes, commission of the intermediaries, etc.
These costs should be detracted from the initial deposit you have available.
Everything you include in the credit will generate interest. However, it often happens that many people do not consider them and when the time comes to close the deal, they appear surprisingly.
Then the banks offer you a new solution: to include those costs in the mortgage credit.
Experts recommend avoiding it because they will become interests at 15 or 30 years.
4. Beware of builders ‘ mortgages
If you are buying a new home, it is very common that the builders (or real estate companies) that are in charge of the project, offer you to process the mortgage credit.
The most common argument is that they can do the paperwork more quickly and even get you a lower interest rate because they have some kind of agreement with a banking entity.
Construction companies offer to manage credits that are not necessarily the most convenient for you. The problem is that not necessarily that bank offers the mortgage credit that best suits you.
And in this sense the basic rule is to compare in at least two or three bancosantes of making any decision.
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5. Check insurance coverage
This point is usually considered to be a minor part of the contract. Mortgage credit generally includes insurance payments against unexpected events such as a fire.
But there are times when coverage only applies under certain conditions. It just takes a disaster, so you realize that the protection was not what you thought.
Some damage insurance does not include coverage against earthquakes or other catastrophes. The other point is that there are catastrophes directly not included in the insurance, for example, earthquakes.
“In the 2017 earthquake in Mexico, there were people who lost their homes and were left with debts because the insurance did not include the damage caused by an earthquake,” explains Mario Di Costanzo.
Ask for a sales?
There are many other elements that should also be considered before buying a house.
One of them is the location. When you buy a home, you are not only buying the “house”, you are also buying the place where it is, everything that surrounds it, including factors such as safety, transportation, schools (even if you have no children), because finally the property is an investment That in the future you can get to sell.
It is always necessary to try a discount because in many cases the price offered considers that there will be such a request. Other potential problems are verbal agreements that can be difficult to prove that they exist. It is enough to have another buyer appear more attractive and the word agreement will be forgotten.
And something that is always necessary, even if you have to disburse extra money, is to ask an independent technician to inspect the real condition of the house, when it is a used home.
Some may have structural damage that is not visible, plumbing or electrical system problems. In some markets, like the U.S., a pre-sale inspection is mandatory.
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Experts recommend comparing before making any decision, however much they press us saying this is a great opportunity and you can lose it if you do not buy fast.
And negotiating the price is something you can not forget, since most of the prices offered, consider that the buyer will ask for a discount.
If you don’t ask for it, you just lose it.
