Real estate in Southwest Florida is an exciting and lucrative market for investors of all kinds.
Buy-and-hold real estate investment has becoming remarkably popular among middle-class investors in recent years. Surely, buying a property in high-end cities like Naples is one of the biggest investments most people will ever make. You may have also been told that real estate investments are safe, and the returns sure are attractive.
However, real estate finance can be confusing, especially for first-time buyers. So, before you dive headfirst into your next big purchase, it would be prudent to learn a little bit more about the industry.
Here are some of the common financial mistakes in real estate can unexpectedly add up to a lot of wasted money:
1. Not knowing what your credit score is
The first mistake you can make is not knowing your credit score or rating. This will impact your ability to get a loan or mortgage and will determine how much interest you pay on the loan. The higher your credit score is, the lower the interest rate will be – so you’d want to have a great score!
If you have bad credit, it could be difficult for you to get financing without paying a much higher interest rate than someone with better credit. You should always strive to improve your credit before seeking a mortgage or other loan.
2. Not setting a budget
Do not start looking for properties in Naples or Fort Meyers until you have set a budget and know exactly how much money you can spend. You should also have an idea of what your monthly repayments will look like before applying for a loan. This will help prevent you from getting into financial trouble in the future, especially if interest rates increase.
3. Not having enough money saved for closing costs
Buying a home requires closing costs — including lender fees, attorney fees, title insurance, transfer taxes and escrow or closing day charges — which typically total between 2% and 5% of the home’s purchase price. If you don’t pay these fees at closing, they’ll be added to your mortgage loan balance.
To avoid this mistake, be prepared to pay closing costs upfront or negotiate with the seller to pay them for you.
4. You don’t read your lender’s fine print
Before you sign on the dotted line, make sure to read all of your documents carefully. Don’t just skim through them — actually sit down and read everything line by line so that nothing is missed. It’s easy to get caught up in excitement over your new home and not really take time to understand what you’re signing, which is why many people end up making costly mistakes when they buy a home.
5. Not working with a real estate agent
Since most of these mistakes are hard to spot, working with a real estate agent can be one of the most important steps in finding and purchasing your dream home.