Buying a home is one of the largest investments you'll ever
make! Your home mortgage, taxes, and insurance costs can range from 25% to 40%
of your gross annual income. Make sure you conduct research and talk to
professionals regarding your home purchase.
And, even as a 2nd, 3rd, 4th time home buyer…beware! Some
things may have drastically changed since your last home purchase!
Check these
out...you'll be glad you took the time to understand the process and that you
didn't end up making one (or more) of these common mistakes:
1. Looking for a home without being pre-approved.
Pre-approval and pre-qualification are two different things.
During the pre-qualification process, a loan officer asks you a few questions,
then hands you a "pre-qual" letter. The pre-approval process is much
more thorough and provides you with a hands-down advantage when searching for a
home.
During the pre-approval process, virtually all the work
associated with obtaining full-approval is done by the lender. Since there is
no property yet identified to purchase, an appraisal and title search are not
conducted.
When you're pre-approved, you have much more negotiating
clout with the seller. The seller knows you can close the transaction because a
lender has carefully reviewed your income, assets, credit, and other relevant
information. In some cases (when there are multiple offers on the home, for
example), being pre-approved can make the difference between getting the home
you want or not. Also, you can save thousands of dollars as a result of being
in a better negotiating situation.
Most realtors will not show you homes until you are
pre-approved. They do not want to waste yours, theirs, or the seller's time.
Look to a trusted lender to become pre-approved by checking your credit and
verifying your income and assets.
2. Making verbal (oral) agreements!
If anyone encourages you to sign a written document that is
contrary to their verbal commitments, do not do it! For example, if the real
estate agent says the washer will come with the home, but the contract says it
will not, the written contract will override the verbal contract. In fact,
written contracts override verbal contracts 99% of the time. When buying or
selling real estate, abide by this maxim: Get it in writing!
3. Choosing a lender because they have the lowest rate and not getting a
written good-faith estimate.
While the rate is very important, you have to consider the overall
cost of your loan. Pay close attention to the APR, loan fees, discount and
origination points, and prepayment penalties. Some lenders include discount and
origination points in their quoted points. Other lenders may only quote
discount points, when in fact there is an additional origination point (or
fraction of a point).
The difference in the way points are sometimes quoted is
important to you. One lender will quote all points, while another lender may
disclose an extra point or fraction thereof at a later time - an unwelcome
surprise when you are determining how much you will really be paying.
Within 3 working days after receipt of your completed loan
application, your mortgage company is required to provide you with a written
good-faith estimate (GFE) of closing costs. You may want to consider requesting
a GFE from a few lenders before submitting your application. You can get a feel
for which lenders are more thorough, and you can educate yourself regarding the
costs associated with your transaction. The GFE with the highest costs may not
indicate that a particular lender is more expensive than another-in fact; they
may be more diligent in itemizing all fees.
The cost of the mortgage, however, should not be your only
criteria. You must also feel comfortable that the lender you are dealing with
is committed to your best interests and will deliver what they promise.
4. Underestimating the costs of owning a home.
Whether it’s a rusty pipe or a leaky roof, things go wrong and need to be fixed. Many homebuyers don't anticipate the additional costs for repair and maintenance, or for an increase in utility costs. Consider the age of your new home and how well it’s been treated by the previous owners in your budget. Be prepared to set aside a small percentage (1% at most) of the home’s purchase price annually for repairs and upkeep.
5. Not using a Realtor to help with the process.
The home buying process can take anything from a matter of
days to months to complete. Working with a Realtor means you have someone who
represents you in the process. That can include helping you with the following:
finding and showing you properties that match your requirements, explaining
paperwork (including contracts and documents), negotiating the price,
negotiating the inspection time allowed in the contract, helping you to keep up
with contract requirements, and more.
Getting pre-approved before working with a Realtor can help
eliminate any problems and can save you money.
6. Not getting a rate lock in writing.
When a mortgage company tells you they have locked your
rate, get a written statement detailing the interest rate, the length of the
rate lock, and other particulars about the program. This is for YOUR OWN protection!
7. Buying a home without professional inspections and taking the seller's
word that repairs have been made.
Unless you're buying a new home with warranties on most
equipment, it is highly recommended that you get property, roof, and termite
inspections. These reports will give you a better picture of what you are
buying.
Inspection reports are great negotiating tools when it comes
to asking the seller to make repairs. If a professional home inspector states
that certain repairs need to be made, the seller is more likely to agree to
make them.
If the seller agrees to make repairs, have your inspector
verify the completed work prior to close of escrow. Do not assume that
everything will be done as promised.
8. Not shopping for home insurance until you are ready to close.
Start shopping for insurance as soon as you have an accepted
offer. Many buyers wait until the last minute to get insurance and find they
have no time left to shop around.
9. Signing documents without reading them.
Do not sign documents in a hurry. As soon as possible,
review the documents you will be signing at closing - including a copy of all
loan documents. This way, you can review them and get your questions answered
in a timely manner. Do not expect to read all the documents during the closing.
There is rarely enough time to do that. This can save you from "unexpected" closing costs that you'll be required to fork over at the closing table!
10. Making moving plans that do not work.
You expect to move out of your current residence on Friday
and into your new residence over the weekend.
Also on Friday, your lease terminates and the movers are scheduled to
appear.
Friday morning arrives: bags packed, boxes stacked, children
under arm and the dog on a leash. You are sitting on your front door stoop
awaiting the arrival of the movers.
Your phone rings. Your loan closing is delayed until the
following Tuesday. The new tenants turn into your driveway with a weighted-down
U-Haul and the movers pull up across the street.
You ask yourself, "Where is the nearest motel and
storage facility? How much will the movers charge for an extra trip? Can we
afford it?"
How can you avoid such a disaster? Cancel your lease and ask
the movers to show up five to seven days after you anticipate closing your
transaction. Consider the extra expense an insurance policy. You are buying
peace of mind - and protecting yourself from expensive delays.
Give us a call at 903.200.4988. We have a great lending specialist, Jeremy Lewis, who can help you alleviate many of the issues mentioned above. Speaking of Jeremy, Homes By Lainie has an ENTIRE TEAM here, ready to make your home buying or selling experience as easy, fast, and lucrative as possible!
www.HomesByLainie.com
~Keller Williams Realty~
