Avoiding these costly mistakes can help you save time, money and effort, not to mention stress, when buying a home.
We have all done things that we regretted later in life: whether it’s getting that haircut back in 10th grade, getting acid-washed everything in the 80s because you thought they were so cool, or buying shoes that don’t fit you but still insist on wearing because they look good. The good thing about these mistakes is that they’re trivial and weren’t transformative in any way. If you wasted any money on these blunders, you were able to easily bounce back from them. However, there are some mistakes that are too costly to make, such as when you are purchasing a house. Yet, people make these errors more often than you think.
1. Not checking your credit report and credit score.
Once you start thinking of buying a house, the first thing you should do is to get a copy of your credit report. You have a better chance of getting preapproved for a mortgage and a low interest rate if your credit report is clean and if you have a high credit score. Credit scores can range from 300, which is the poorest score, and 850, which is the highest score.
Give yourself time to make sure that your credit report is accurate and to dispute any inconsistencies even before a mortgage lender sets eyes on it by checking it at least a few months in advance of applying for home mortgage.
2. Failing to get preapproved for a mortgage.
Some homebuyers become dismayed when they find and fall in love with a home only to discover that they can’t afford it. What most people don’t realize is that getting preapproved for a home loan is one of the crucial steps in the home-buying process. This will provide you with a realistic idea of just how much you can afford to prevent the above-mentioned scenario. Aside from this, it also shows sellers that you are serious about buying a house.
Besides your credit report, you will need to gather other relevant financial documents, such as bank statements, tax returns, pay slips, etc., to provide the lender with an accurate debt-to-income ratio and a more detailed analysis of your financial standing.
3. Forgetting to factor in other costs involved with purchasing a house.
Keep in mind that buying a home entails other costs aside from the mortgage, such as property taxes, homeowner’s insurance, closing costs, and escrow fees. Aside from those, you also need to prepare for moving costs, utilities, and repairs and maintenance. If you were previously renting and discovered something that needs to be repaired or replaced, all you did was call the landlord. Once you own a home, you’ll be responsible for things that need fixing or replacing. Even small expenses can add up to a significant amount of money over time.
4. Interviewing only one real estate agent and/or lender.
Buyers should make sure that they feel at ease with their real estate agent. He or she should be patient, friendly and accommodating. First-time home buyers, especially, need more time and attention, and the agent should show them homes that fit their needs and limitations, as well as help them plan a strategy during the bidding process. You should never feel pressured to do or buy something you’re not comfortable with. Be sure to at least interview more than one real estate agent and hire the one that can connect with you and understand your needs and wants.
Similarly, it is important to interview more than one lender since the rates and fees offered by one institution varies from another. It’s a good idea to interview with a major bank, a regional bank or credit union, and an online lender.
5. Making another loan while waiting for your home loan to close.
There is a long process between the time you get your mortgage pre-approval and the closing of your home loan. During this time, you should make sure to pay your bills on time and avoid making new loans, opening new credit accounts, or buying anything on credit and/or with your credit card because slight changes in your credit ratios may cause lenders to either change the terms of your mortgage or withdraw their loan offer altogether.
On a related note, you might also want to avoid making any life changes that can affect your credit score for the time being, such as switching jobs.
These are just some of the common mistakes that people make when purchasing a house. Remember that when it comes to major investments, you need to make sure all your bases are covered. Consult with professionals and utilize their expertise, but also take the time to conduct your own research, not hesitating to ask questions, so that you can make an informed decision.