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The Mortgage Firm

News & Insight

5 Homebuyer Mistakes to Avoid

By TMF Marketing

Mistake #1: Not using a Real Estate professional to represent you.

Buying a home is an exciting and fun process but can also be stressful and emotional. When you think about negotiations, inspections, appraisals, insurance, financing, etc., you’ll have to prepare yourself for a full-time job for the next 60-90 days. That is, unless, you work with a licensed real estate agent to handle much of the stress for you.

Working with a Real Estate professional has many benefits including saving you time and money. Experienced agents can negotiate on your behalf, not only regarding sales price but also during the inspections and to closing, to make sure your best interest is looked out for.  They have access to many properties via the Multiple Listing Service (MLS) that everyday homebuyers don’t have access to, and that is especially important because many properties are not uploaded to your favorite home search websites. Best of all, in most markets, a buyer’s agent does not cost anything for the buyer, so why not use an agent?!

NOTE: Be sure to use your own agent and not the listing agent. Many people believe that they can get a better deal by working directly with the listing agent for the property that they would like to purchase, however, we discourage this.  It would be like hiring the attorney of the person that is suing you, to also represent you. There is a clear conflict of interest and more than likely, things will not work out in your favor when it comes to negotiating inspections, appraisals, etc.

 

Mistake #2: Confusing Pre-qualification with Pre-approval.

You may be asking yourself, what is a mortgage pre-qualification or pre-approval? Pre-qualification or pre-approval is an early step in your home buying journey. When you pre-qualify for a home loan, you are getting an estimate on the amount that you would be eligible to borrow based on the information you provide about your finances, as well as a credit check. This amount will give you a general idea of what your price range should be. This process provides the opportunity for you, the borrower, to learn about different mortgage home financing options and identify what the perfect fit is for your needs and goals.

A pre-approval takes the pre-qualification one step further and is issued after the lender has reviewed your financial documents and has verified the information you provided. Once pre-approved, you’ll receive a pre-approval letter, which is an offer but not a commitment, to lend you a specific amount. When submitting an offer for a home, a pre-approval lets the seller know that your offer is more solid because the lender has actually reviewed all of your documentation and is not just going off of a conversation.

 

Mistake #3: Not checking credit reports and correcting any errors.

When applying for a home financing loan, a credit report is extremely important. Lenders will pull credit reports at pre-approval and at closing to make sure nothing has changed with your finances. This helps the lender decide whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than what you are wanting.

To help keep your finances up to par from pre-approval to closing; don’t open new credit cards, close existing accounts, take out new loans or make large purchases on existing credit accounts in the months leading up to you applying for a mortgage through closing day. You want to pay down your existing balances to be below 30% of your available credit limit, and pay your bills on time and in full every month.

 

Mistake #4: Skipping the home inspection.

The home inspection is an added expense that not many first-time homebuyers consider to be very important. After seeing the property and nothing appearing to be wrong can lead homebuyers to be deceived. Professional inspectors often notice things most of us wouldn’t, so this step is especially important if you are buying an existing home. If the home needs repairing, an inspection can help you negotiate with the current homeowners to have the issues be fixed before closing or to adjust the pricing of the home to be accordingly.

 

Mistake #5: Not budgeting for closing costs.

Buying a home involves closing costs, which are fees and expenses you pay when you purchase or refinance a home. Beyond the down payment, these costs can run 3 to 5 percent of the loan amount. Closing costs normally include charges for title insurance, property taxes, homeowner’s insurance, government taxes, and recording fees, escrow costs, appraisal fees, etc.

These costs are due when you sign the final mortgage loan documents. To help prepare for these costs, be sure to know exactly how much money you will need to come up with in addition to your down payment. This will help make your purchasing process less stressful.

 

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