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12 Home-Buying Mistakes

13 Sep

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If you are preparing to buy a home of your own, then check out these top 12 home-buying mistakes that most people make. Being aware of these mistakes will prevent you from falling into the traps others have.

1. Not being aware of mortgage options

There is a general perception that only those with moderate or high income will be approved for a mortgage. Those with a low income or poor credit avoid going for mortgages because they feel that either they won’t qualify, or won’t be able to pay the fees and interest associated with them.However, there are plenty of programs with special features available for borrowers with different income levels. What programs are available depend on the state of the economy and the housing market. What buyers need is a little knowledge of mortgages and their pros and cons to purchase their dream house with the best program available.

2. Find a home without pre-qualification or pre-approval

The first thing anyone aspiring to homeownership should do is get prequalified/preapproved for a mortgage. This will help you learn how much you can afford before you go shopping for your dream home. Make sure that when you get prequalified/preapproved for a certain loan amount, you get a letter from the lender specifying how much you are approved for as this will speed up the home buying process.

3. Not shopping around for the best lender

Borrowers usually try to get loans from the lender who offers the lowest interest rate but ignore the other costs like the APR, loan processing fee, and other closing costs. The lender’s reputation and the services they offer are also worth considering.

4. Buying a home without a home inspection

A home inspection is one of the most important steps when buying a home. Home inspection helps you find out how much damage has been done to the property and how much it will cost to repair. If the inspection report estimates that the repairs are more than you can afford, you may be able to get out of the contract without losing your earnest money. Most lenders, including those offering FHA loans, require a home inspection before they’ll give final approval to your loan.

5. Making verbal statements

Lenders and real estate agents often make oral promises they can’t guarantee will be part of the contract for a deed. You need to make sure that any promises are guaranteed in writing and conform with your state’s law before you sign the contracts.

6. Signing documents without checking

Because brokers are paid by the number of people they sell loans too, they rarely give their customers the opportunity to read the loan agreements at closing. Therefore, you should ask your broker to send you copies of the agreement before closing so you can read them before signing.

7. Not getting a Good Faith Estimate

Before signing the mortgage agreement, you should understand what fees are associated with getting the loan, such as the document preparation fees, the public notary fees, etc. So before you sign the mortgage, get a Good Faith Estimate (GFE) from the lender. The lender should be able to provide you with a GFE within 3-7 business days of applying for the loan.

8. The rate-lock is not made in writing

If you are getting a mortgage, you should get a rate-lock agreement from your lender that will specify the interest rate, how long the rate lock will last, and any other details you desire. This is especially important if you are agreeing to an adjustable rate mortgage (ARM).

9. Locking in at a low interest rate

The majority of buyers wait for market rates to dip before going for a mortgage. But, it’s hard to predict how long a certain interest rate will last before the market conditions allow lenders to raise them again. Therefore, the moment you find an interest rate you can afford you should lock into it.

10. Use an agent who represents both buyer and seller

Only a few agents represent both buyers and sellers. Most agents specialize in representing one party. One of the worst mistakes you can make is to hire an agent who represents both. You need to have an agent who will solely represent your interests.

11. Terminating the lease on the date of closing

If you are renting a home, you need to make sure the lease terminates after you move into your new home. Even though this may mean that you may be paying a mortgage and rent in the same month, it will protect you if there are delays in closing or moving.

12. Shopping for home insurance just before closing

Few sellers will accept an offer if you don’t have funding ready. If you are unable to get a loan, you may lose your earnest money and the house of your dreams. Therefore, the best time to start shopping for a loan is the minute you decide you want to buy a home.

While everyone makes some mistakes when buying a home, some of the most common mistakes can be avoided if you are prepared. One of the worst mistakes you can make is to choose the wrong mortgage. But if you know what to not do when looking for a home loan, you’ll be able to enjoy your home for years to come.

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