Whether you're a first-time homebuyer or someone who has bought a house in the past but needs a refresher, today we're discussing what not to do when buying a home. These rookie mistakes will cost you time, money and unnecessary stress so be sure to read up on these rookie home-buying mistakes and be sure not to make them when it comes time to purchase your home.
Mistake #1: Equating affording a mortgage as being the same as affording a home. This is a common mistake. First-time homebuyers often make the decision to purchase a home when they are comfortable with the idea of paying a mortgage every month and being able to afford it. And, that is OK. However, that's only one slice of the home ownership pie. Property insurance, taxes, homeowners association dues, and maintenance, and potentially utility bills are some of the costs that first-time homebuyers tend to overlook when shopping for a place to call home. Some of these costs have a tendency to go up every year. And then there are home improvement costs, maintenance expenses, and other surprises that can crop up along the way that as a renter you may not think about
Mistake #2: Shopping for a home before shopping for a mortgage. We all make this mistake, too. It's called "kicking tires." But, unless you kick a few tires, you may never know what type of house you may want to buy. The main point here is, as a general rule of thumb, before you begin shopping for homes, you should be getting pre-qualified and pre-approved for a mortgage. The process does two thing for you, the homebuyer: 1. It gives you a price range of homes at which to look at and 2. it gives you street cred with sellers and their agents, especially when you have made an offer. Your buyer's agent can show the listing agent that you can back up your offer. And that is a powerful negotiating tool.
Mistake #3: Spending your life's savings on a downpayment.
The days of requiring a 20% downpayment to qualify for a mortgage are long gone. There is nothing wrong with putting down 20% but if it requires all of your savings, it is a far better idea to look at other mortgage programs. Homeownership inevitably comes with a few surprises, so go ahead and expect the unexpected. If you buy a previously owned home, unexpected repairs start cropping up pretty quickly. If your budget is too tight or you've used up all of your savings just to purchase and make payments on the home, you could quickly find yourself in a hole financially.
As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs. But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment. There are plenty of low-down-payment loan programs out there, including state programs that offer down payment assistance and competitive mortgage rates for first-time home buyers. You might qualify for a U.S. Department of Agriculture loan or one guaranteed by the Department of Veterans Affairs that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.5%, and some conventional loan programs allow down payments as low as 3%.
Mistake #4: Going to Rocket Mortgage for a loan.
Just as all real estate is local, so is all real estate financing. Indeed, when my wife and I purchased our first home in Emerald Isle, my local banks in Durham wanted nothing to do with lending us the money for the purchase. In the end our loan was underwritten by a bank in Ohio and that reminds me of two stories that underscore my point about local financing. Shortly before we closed, I received a call from the Ohio bank’s appraiser and he asked, “How can a stick built home cost so much money?” I replied with “maybe it has something to do with the house sitting on beachfront property” A few days later, closing had to be postponed when that same bank sent a regular check to the attorney who required a cashier’s check. I had driven down three hours for the closing and I would have to make that trip three more times before I took possession of the house. In the end, whether you elect to use a local institute to underwrite your mortgage or not is of no consequence to me. But, whatever you do, please do not go with the Rocket. When that Rocket takes off with your personal information, you have absolutely no idea where on the internet your information is winging off to.
Mistake #5: Not checking your credit report for accuracy.
Here is where a skilled mortgage banker or broker comes in very handy. You may not know if your credit report is accurate. Most people don't. But, a good mortgage broker can check the accuracy and, more importantly, help make it accurate or, if your credit score is low, show you how that credit score can be raised. I recommend that my clients reach out to my mortgage banker or my mortgage broker to check the accuracy of your credit report. My mortgage banker specializes in VA home mortgages and my mortgage broker specializes in loans to small business owners and buyers with less than ideal credit. If you fall into any one of these categories, you really should work with one of these individuals.
Mistake #6: Applying for new credit, loans, or changing your debt-to-income ratio before the home sale is final. This is a huge mistake that can send your home buying down a rabbit hole. You have pre-qualified for a loan. You found the house you wanted. The contract is signed and the closing is in 30 days. Don’t celebrate by financing another big purchase. Lenders pull credit reports before the closing to make sure the borrower’s financial situation has not changed since the loan was approved. Any new loans on your credit report can jeopardize the closing. Wait until after closing to open new credit accounts or to charge furniture, appliances or tools to your credit cards. It’s OK to have all those things picked out ahead of time; just don’t buy them on credit until after you have the keys in hand.
Mistake #7: Going it alone instead of enlisting the help of real estate professionals. I've saved the biggest mistake for last. New to the home-buying game? Venturing into this process is not a good idea without professional help. First, all real estate is Local and the detailed knowledge a local real estate agent possesses trumps the cursory information contained in national internet marketing sites. Second, you, as a buyer, need representation. If you didn’t already know, North Carolina is a "buyer beware" State and, as such, all real estate agents legally represent the Seller....until otherwise engaged. This is why a savvy buyer ALWAYS engages representation and the engaged agent, whether it is me or another individual, is now known as your Buyer's Agent. A buyer's agent like me is there to represent you, your rights, and your interests as a buyer of real estate. As a Buyer's agents I am legally bound to help buyers, whereas listing agents—the agents representing the home listings—have a fiduciary duty to the home sellers. That's why it's in your best interest as a buyer to contact a buyer's agent, and not the listing agent, when you want to see or purchase a home. A good buyer’s agent, like me, like me, will assist you every step of the way. I will help you find the right property, negotiate the offer, recommend other professionals like mortgage brokers and real estate attorneys, and help overcome any setbacks.
I've covered a lot of ground here. For more information, or to reach out, visit my website at www.EIHomesforSale.com for my free Guide to Living Where You Vacation or text your email address to: 919-308-2292.
コメント