Buying a home can be an exciting and rewarding experience, but it can also be a challenging one. If you want to make sure the process goes smoothly, there are a few common mistakes you can avoid when buying a home, and we’ve got five big ones to share with you today!
1. Skipping Preapproval
When you are in the market for a new home, getting preapproval from a mortgage lender is always a good idea. It gives you reasonable certainty about what you can afford, and it shows sellers that you are serious about buying.
Can you still get a mortgage if you find the perfect home before getting preapproval? Probably so (although it may not be as quick or easy). But the more important question is: If you find yourself in a multiple offer situation and you are the only buyer without a preapproval, what are your chances of the seller taking a gamble on your offer?
2. Going with Your First Mortgage Quote
Shopping around for a mortgage may seem like extra work on the front end, but it’s well worth it. Different lenders may have different interest rates, fees, discounts, and even closing costs. They may also offer different mortgage types. Some may have more competitive rates while others have flexible requirements. It is important to compare the terms and conditions of each offer before making a final decision.
If worry over your credit score has you sticking with the first bank you looked at, you’ll be happy to know that as long as your applications fall within the same forty-five-day window, they all count as one credit inquiry. If you go to five different banks for a mortgage quote, the credit bureaus know you’re not likely to be buying five different houses.
Speaking of your credit score, make sure you request your free credit report for the year from all three major credit bureaus to ensure everything is correct. This information could affect the mortgage quote you receive, so you want it to be as accurate as possible!
3. Working Alone
A REALTOR® can help you find the perfect property for your needs and budget. The have access to MLS listings, which means they can show you houses that may not show up on online listing sites like Zillow, Trulia, or even realtor.com. They also have indispensable expertise and local connections that come in handy as you navigate the process of home buying. A REALTOR’S® commission is paid with proceeds deducted from the closing, with very few exceptions.
4. Not Knowing Your Own Budget
While a preapproval will give you a good idea of how much house you can reasonably afford, it’s still a good idea to take a long look at your finances before getting in over your head. Start with a mortgage affordability calculator (there are several good ones online). You want one that takes several factors into account:
- Yearly household income
- Monthly payments
- Down payment
- Loan term
- An approximate credit score, and
- Interest rate
You should be able to tinker with the loan factors to see what purchase amounts result in higher or lower monthly payments, how different down payments affect how much you can afford, and so on. Remember that a mortgage affordability calculator is a tool to get you in the right ballpark—it is not a replacement for professional advice.
As you budget, keep in mind that there are a lot of hidden costs when buying a home. Inspections, the appraisal, an earnest money deposit, ownership transfer fees, insurance, and more could catch you by surprise if you’re only taking the list price into account..
5. Making Big Purchases before Closing
It may be exciting to think about new furniture, appliances, and other things you’ll buy for your new home, but resist the urge to buy them before the home is actually yours. You want to keep your finances as stable as possible all the way up until the last i is dotted and the last t is crossed, as your mortgage lender will very likely check your credit just before closing to make absolutely sure nothing has changed in your financial situation.
That includes gift money well-meaning relatives may want to give you to help set up house. A lender may see this as proof that you can’t actually afford the home in question without help.
Yes, this does apply even if you have been preapproved! Your lender is not locked into any kind of agreement with you when they give you preapproval, and they can still delay closing or deny your mortgage completely all the way up to closing if they have reason to believe your financial situation was misrepresented or has changed in some way.
Looking for a trustworthy REALTOR® to help you start the home buying process? Our trusted agents have the expertise you need, and we love what we do! Contact us today to see what we can do for you.