Here is a list of top 10 mistakes to avoid when buying a house. Most of the people will spend their biggest lifetime investment to buy a home. Taxes, Annual mortgage and insurance can cost from 25% to 40% of your gross annual earnings.
My idea of writing this article is to educate or help you, so that you can protect yourself, when you make this important decision of your life.
1. Looking for a home without being pre-approved.
Many people don’t have a clue that Pre-approval and pre-qualification are two different things. In the pre-qualification process, the loan officer asks you a few questions, then hands you a “pre-qualification” letter.
However, the pre-approval process is much more time consuming and lengthy. During this process, all work associated with obtaining the full-approval is virtually done by the mortgage company. Since there is no identified property to purchase, however, an appraisal and title search aren’t conducted.
When you’re pre-approved, you have much more negotiating terms to debate over (with the seller). The seller at this stage knows that you can close the transaction because a lender has carefully reviewed all your relevant information (income, assets, credit etc).
In some cases, being pre-approved can make the difference between buying and not buying a home. Also, when you are in a better position to negotiate, you can save thousands of dollars.
Most reputable Realtors do not prefer to show homes to people unless they are pre-approved. They do not want to waste their, your or the seller’s time.
There are many mortgage companies that can help you become pre-approved, with minor charges. Usually they will check your credit and verify your income and assets.
2. Making verbal (oral) agreements!
If you face a situation where an agent wants you to sign a written document, that does not state or incorrectly state your mutual (verbal) commitment, then don’t do it! For example, if the agent verbally says that the oven will come with the home, but the contract contradicts it, then the written contract will override the verbal contract. Do remember that mostly in all cases, written contract overrides verbal contracts. When buying or selling real estate, always make sure that you get a written contract!
3. Choosing a lender because they have the lowest rate.
Not getting a written good-faith estimate.
At times, people tend to pay little or no heed to the cost of their loan and pay more attention to the rate. Always remember to Pay close attention to the APR, loan fees, discount and origination points. Some lenders include discount and .inauguration points in their quoted points. Other lenders may only quote discount points, when in fact there is a supplementary inauguration point (or portion of a point).
This difference in the way points are sometimes quoted is significant to you. One lender will quote all points, while another lender may reveal an extra point, or part of it, at a later time–an unwanted surprise.
Usually in 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 can consider requesting a GFE from a few lenders before forwarding your application. With a few GFEs to compare, you can get a feel for which lenders are more detailed, and you can teach yourself about the costs related with your transaction. The GFE with the highest costs may not point out that a particular lender is more expensive than another. However, they may be more thorough in itemizing all fees.
The cost of the mortgage, however, shouldn’t be your only standard of judgment. There is no alternative to a family / friends advice or referral for interviewing potential mortgage companies. You must also feel hassle-free that the loan officer you are dealing with is dedicated to your interests and will deliver what is promised.
4. Choosing a lender because they are recommended by your Realtor.
Always remember that Realtor is not financial experts. He/She may not know which loan is best for you. Your Realtor gets a commission only when your deal closes. Realtor referrals may not be the best option, because Realtor may refer you to one of their friends in the loan business, who also may not have the best rates or fees.
Although mostly, Realtors are professional and concerned about your best interests, you should have complete knowledge of the market.
I would recommend that you should do a survey for a loan with at least three mortgage companies before you take your decision. There are consumers who have often been very casual and who ended up paying far more than what they could have, or got a loan that wasn’t right for them, because they blindly followed their Realtor’s advice.
For secure and convenient loan options, you can visit Riegelwood Credit Union.
5. Not getting a rate lock in writing.
Always ask for a written statement detailing the interest rate from your mortgage company. The length of the rate lock, and other particulars about the program should also be clearly mentioned..
6. Using a dual agent (an agent who represents the buyer and seller in the same transaction).
Both Sellers and Buyers have opposing interests. Both want the best price (buying and selling). In most situations, dual agents cannot be fair to both buyer and seller. Usually, the seller pays the commission, so the dual agent may negotiate harder for the seller (than for the buyer). Therefore, If you are a buyer, it is advisable to get your own agent to represent you.
7. Buying a home without professional inspections. Taking the seller’s word that repairs have been made.
It is highly recommended that you should get everything inspected, before you make any final dealing. Unless of course if you’re buying a new home with warranties on most equipment. Check the Inspection reports for the property, if available. These reports will give you a better picture of what you’re buying. Inspection reports are great negotiating tools when it comes to asking the seller to make repairs. If any repair work is required, you will have a better ground to negotiate your terms.
8. Not shopping for home insurance until you are ready to close.
Start looking 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.
Not Reading Documentation properly can cause you a lot of trouble. Read and review the documentation that you’re supposed to sign (in order to close the deal), including a copy of all loan documents. You can review them and get your questions answered in a proper manner. Concentrate on reading only the important/related documents because you won’t have a lot of time to do so.
10. Making moving plans that don’t work.
Here is a scenario, which you have to watch out for. You expect to move out of your current residence to a new residence on Friday (over the weekend). Also on Friday, your lease terminates and the movers are scheduled to appear.
Friday morning arrives: everything packed and set; you’re ready to move and sitting on your front door, awaiting the arrival of new tenants and then you get a call. Stating that your loan closing is delayed until Tuesday. The new tenants also arrive at the same time.
In order to avoid such a disaster, you should cancel your lease and ask the new tenants to show up after a week or so, after you expect closing of your transaction. Consider the extra expense of an insurance policy to get a peace of mind–and protecting yourself from tougher, much more expensive delays.