Buying a home involves a ton of legal documents. Signing something you do not understand or did not read thoroughly can prove to be very costly and nearly impossible to undo.
Know more about some of the common problems involved with legal paperwork, as well as how to avoid them:
Interest Rates
Always know whether an interest rate is fixed or variable. Be wary of any seller or lender who is unclear regarding this detail. Don’t get lured in by offers that claim “low monthly payments,” as these often do not show the complete picture. The cost of variable interest rates can accumulate over time – even a seemingly miniscule percentage increase in interest rate can mean hundreds of dollars every month.
Increasing Payments
Be cautious with mortgage offers with unusually low introductory monthly payments. Often, these mortgages start with a low interest rate, and the fees you pay only cover a portion of the interest. Eventually, the unpaid interest combines with the mortgage itself, leading to payments that can double or triple over time.
Hidden Costs
If you’re not careful, you can end up owing a hefty amount of dollars in property taxes, as some lenders do not include them in your monthly payments. Always know whether the property tax is separate. You can check taxes by getting in touch with a county’s appraisal district, or go online – many counties have tax information available on their websites.
Contracts for Deed
Also known as “rent to own” arrangements, contracts for deed are perfectly legal in the state of Texas. Under a contract of deed, a buyer does not immediately gain equity in the property while making payments. He or she only gains equity after either paying 40% or more of the loan, or making 48 monthly payments. Be very careful before you sign such contracts, as many buyers have lost their homes due to this type of contract’s strict conditions. Make sure you are able to meet all of its demands before going ahead, and consult your agent if you’re unsure about any of the conditions stated.