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(22) TEN FINANCIAL MISTAKES YOU CANNOT AFFORD

http://www.canadianrealestatemagazine.ca
 Jarek Bucholc

Making mistakes is part of just about everything – that’s how life works.
No one ever said it’s going to be easy, or that you’ll glide through on waters that are as still as a mirror.
Of course you’re expected to stumble, to make occasional lapses on your judgement, to fall on your face at least every now and then.

But when it’s about something as major purchasing a property, it would definitely put you in good stead to make a conscious effort to know what to avoid in the first place. That way you don’t waste time and, just as importantly, your hard-earned money in the process.

So what are the financial property mistakes you can do without?

Here are some of the most common.

1.- Choosing the wrong mortgage
It’s no secret that with the plethora of home loans out in the market today, you have more than enough choices on your hand. That being said, the last thing you want is to end up saddled with a loan that’s not a good fit for you – even in a short amount of time.
Do your homework and investigate all possible options, and then gradually filter out your choices as you go along.
To make an educated decision, determine important factors like interest rates, both initial and future, and the probability of prepayment penalties.

2.- Confusing “pre-approved” with a “pre-qualified” loan
They may be very similar, almost the same, in fact, but they’re not.
When you are pre-qualified for a loan, it means the lender is making an educated guess on how much you can borrow, based on the details you provided.
Now, if you’re pre-approved, that means that the lender has already confirmed and verified the details you have provided, and is offering to lend you a certain amount at current interest rates – under a set of certain conditions, of course.

Whether you’re pre-approved or pre-qualified, it’s best to remember that the final clearance –your loan commitment– is still subject to an appraisal that’s satisfactory to your lender, a good title, and any last-minute credit checks and verifications that may arise.
In order not to be left in the dark, make it a point to ask your prospect lenders to explain clearly about each term or step needed to make a successful loan.

3.- Having too much credit
Anything in excess is bad, and the same goes for too much credit. Even if you have a good credit standing, lenders will still pay attention on just how much bills you have — even if you pay on time.
The best course of action is to be mindful of your loans and avoid major purchases until after you bought your house.

4.- Lying on your application
It won’t do you any good to exaggerate on your income when filling out your mortgage application, so best that you don’t.
You should also be very careful that you don’t sign your name on a loan application that hasn’t been completely filled out. Loan officers tend to stretch the truth to get a loan approved, but remember that it’s your name on the line. The last thing you need is to be at the receiving end of a loan you can’t afford to pay.

5.- Hiding if you can’t make your payments
Whatever you do, do not ignore phone calls from your lender –yes, even if you’re lagging behind on your payments. Lenders actually have quite a lot of options to help you from losing your house to foreclosure, but they won’t be able to assist you unless, of course, they know the difficulties you’re going through.

6.- Skipping a home inspection
Failure to go about a satisfactory home inspection can quite easily spell out a costly mistake. You can opt to hire independent home inspectors; they can aptly let you know if the basement or roof leaks, whether the mechanical systems are functioning, and how long the appliances are expected to last. They may not be able to report on everything, but their trained assessment will still be much better than yours. So consider that $300-400 an investment well spent.

7.- Hiring just about any agent to sell your house
Real estate is a specialized field. That means you can’t hire just any random person and expect him to do wonders with the property you want to put on the market. To get favorable results, look for agents who specialize in your neighborhood, and those with excellent track record. If you’re not satisfied with your prospect agent’s plan on marketing your house, move on. You need to hire the best possible candidate to get the best possible result. And no, opting for relatives don’t count – unless they happen to be reputable agents.

8.- Failing to properly check out a remodeler
Do not even consider hiring a contractor who knocks on your door, or one who claims that his discounted rates will only be valid in the next few days.
First of all, notable contractors do not make it a habit to advertise their services on door-to-door basis. Nor do they slash their prices just because they happen to be in your district.
Check the credentials and references of your prospect contractor to get a good idea of his professional credibility – or lack thereof.

9.- Paying too much upfront
Be careful if your contractor asks for more than a third of the agreed contract price as a down payment; there’s a very good chance that something is wrong. He can be a scam artist with no intention whatsoever of returning once he cashes your check, or on a slightly less comforting scenario, he could be seriously underfunded and can’t afford to buy materials on his own.

10.- Burning your mortgage
You may be tempted to hold a mortgage burning celebration after you’ve paid the last instalment on your loan. And it is quite tempting to do so. After all, the house is yours – finally.
The sensible thing to do, however, is to make a copy and burn that instead – not the original.
Make sure to keep your loan documents in a secure place, even after it has been fully paid.


Jarek Bucholc is founder of  Canada Real Estate Investors Club.

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