5 COMMON MISTAKES HOME-BUYERS MAKE
By Jessica Hudson | March 1, 2019
Buying more home than you can afford
When you get preapproved for a mortgage, a lender will typically tell you the maximum loan amount it looks like you will be approved for. This doesn't necessarily mean you should use that figure as your target price. The estimated monthly payment including taxes and insurance should be closely examined to deremine what truly is in your budget.
Not having your financing ready when you want to make an offer
If you want a house, and you love it, you don't have any time to waste. In today's environment if you love the house, don't leave without putting in your offfer, or the next family might. Assuming you have already done your homework, you know what you will be approved for and you know what is in your budget. Instead of thinking about it over the next several days, get your offer in fast and think about it during the negotiations or option period.
Not considering all of the costs involved
It's not just the price of the home that you should factor into your budget. Yes, the down-payment is likely the largest single cost of purchasing a new home, but closing costs and move-in expenses can also add up and should be planned for. When deciding your home budget, it is a good idea to get a closing cost estimate from your lender. However, there are options avaliable to reduce or elminate closing costs such as a seller or lender credits. Some of the big-ticket moving expenses include movers, new applices, repairs, and furniture.
Not keeping a paper trail for cash gifts
If you receive any cash gifts you want to apply towards your down payment, be sure you are able to trace the source. Large cash deposits cannot be used if they cannot be sourced. The deposits basically have to be backed up by bank statements. This also applies to any cash you might have saved up over the years yourself. Make sure to get that cash deposited into a bank account two full months before applying for a mortgage to "season" it, i.e., to not have to source it.
Altering financial pictures prior to closing
You have started the loan application and have even been approved. What harm can come from opening up a new credit card or financing a new car, right? Wrong. Once you are in the mortgage process, do not open any new credit lines without first talking to your mortgage broker. Any new debts incurred before your loan closes will be taken into consideration for qualifying. This could delay your closing if your loan has to be restructured or worse, can extend your debt-to-income ratio too far and you no longer qualify for the loan.