25 Biggest Mistakes When Buying a Home

The most common mistakes are made by three people

YOU - A REAL ESTATE AGENT - A LOAN OFFICER

Fourteen Ways How YOU Make a Mistake

1) You Start Shopping Without Getting a Mortgage Pre-Approval

Pre-approval and pre-qualification are two different things. During the pre-qualification process, a loan officer asks you a few questions, runs a credit check, calculates your debt-to-income ratio’s, and hands you a “pre-qual” letter informing you how much you could be approved for.

During the pre-approval process, the mortgage company does virtually all the work associated with obtaining a full approval. Since there is no property yet identified to purchase, the appraisal and title work are not ordered.

When you’re pre-approved, you have much more negotiating clout with the seller. The seller knows you can close the transaction because a lender has carefully reviewed your income, assets, credit, and other relevant information. In some cases (multiple offers, for example), being approved can make the difference between buying and not buying a home. Also, you can save thousands of dollars as a result of being in a better negotiating situation.

Most Realtors will not show you homes until you are pre-approved. They don’t want to waste your, their, or the seller’s time.

Many lenders today offer pre-approvals through the Fannie Mae and Freddie Mac computerized loan origination systems. These are the fastest and most accurate pre-approvals in the industry.

2) You Don’t Get Your Interest Rate Lock in-Writing.
When a mortgage company tells you that they have locked your interest rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.

3) You Try to Make a Shrewd Investment.
A home is a place to live and should be evaluated based on your family’s lifestyle needs and budget. You’re likely to live in a house for at least five to seven years, during which it is nearly impossible to speculate on price appreciation. Instead of looking for the best deal, choose a home that appeals to you.

4) You Buy an Overbuilt House.
An overbuilt house is the one with all of the extra amenities. It has the swimming pool, the fireplace, the hot tub, and a price tag that’s several thousand dollars higher than other houses in the neighborhood. For the same reason that you won’t get much of your money back when you make home improvements, you shouldn’t buy an overly improved house (unless it costs no more than the rest of the houses in the neighborhood).

Nine times out of ten, you’ll change your mind about the features you want and do other work anyway. Moreover, if you compare the amenity-filled house to those in the same price bracket in a better community, you’ll find that the neighborhood, school district, and other features are more valuable in the long run. Even if you get less house, you can build “under, around, and through a house.”

It is better to buy the cheapest house in the best neighborhood than the best house in a lesser area. In that way, if you ever do improve the property, you have a better chance of getting money back when you finally sell.


5) You Buy a Home that does not Meet YOUR Needs.
This is the house that truly doesn’t satisfy you. Most first-time buyers can afford more house if they take the risk of spending more cash, borrowing from parents, or taking loans from Individual Retirement Accounts and pensions. You’ll live in a house you love for years and there will be plenty of time to furnish it. Spend your furniture money on a bigger cash down payment and buy a more expensive home the first time around.

6) You Are not Certain the Real Estate Taxes are Accurate.
After location, the second biggest consideration is taxes. A low real estate tax makes the home especially appealing. Don’t be fooled by the amount on the current tax or insurance bill. Visit city hall and see if property values are routinely reassessed when property is sold. If so, the new valuation will bring higher taxes. Also see when the last valuation took place. If the property is soon to be evaluated, you may be in for  a shock.

And always, file your HOMESTEAD and MORTGAGE EXEMPTIONS at your county building. At closing, you’ll be notified where and when to file your exemptions. These will drastically reduce your property taxes. 

7) You Make Verbal Agreements.
Always make any agreements in writing, no exceptions! Written
contracts almost always override verbal contracts.

8) You Don’t Get a Professional Home Inspection.
You really need to get a professional property inspection on any home you purchase, preferably performed by a certified inspector. This way you know what you are buying. If the seller agrees to do any repairs, you should inspect to see that everything has been completed, and get written verification of the performed repairs.

9) You Don’t Get a Survey Done.
You should know exactly what you are buying and where the exact boundaries are.

10) You Let Your Heart Rule Your Buying Decision.
While it’s undeniably very important to “feel” about a property, it is
equally important that you don’t make a decision that could end up costing you dearly, both financially and emotionally. If you are really interested , inspect the property at several different times of the day. Keep an ear, eye, and nose open for any undesirable sounds, sights, and smells. Factories that don’t operate on the weekend can seem innocuous enough, but are they the same during the week?

11) You Buy out of Impatience or Desperation.
House – hunting can be a tedious and frustrating process. However, your residential needs are very important, and shouldn’t be compromised because your perfect home isn’t on the market at, or a given time. Patience and persistence will ensure that you find the home that “feels right” and fits your budget. If you get fed up with looking, then stop for a few weeks and start again with a renewed and positive approach. Buy in haste – regret at your leisure.

12) You Make your Moving Plans too Tight.
Allow for a five to seven day window between closing and moving.
This gives you time to deal with any unexpected delays.

13) You Put off Shopping for Home Insurance.
Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and find that they have no time left to shop around. If you are not sure which companies to start with, ask your loan officer. They see insurance policies for every purchase and refinance they are involved in.

14) You Fail to Have a Plan
Deciding to buy a home is probably the biggest financial decision
you’ll make. It’s an exciting decision, but it’s serious business too-and you deserve serious advice.

Zig Zigler, a famous motivational speaker, once said that:
“People don’t plan to fail – they fail to plan.” With a game plan, you will eliminate many of the headaches involved in complicated transaction. You need a clear plan when deciding to buy a home.

Five Ways A Real Estate Agent Can Hurt You.

1) If He or She is Inexperienced.

4) If the Agent Does not Know Secondary Financing Techniques.
Some times buyers do not qualify for a low down payment due to past or current circumstances. An experienced real estate agent can find certain homes where the seller would be willing to assist in secondary financing to get you into the home with little or no money down.

5) If He or She is Also Representing the Seller.
Buyers and sellers have opposing interests. Sellers want to receive the highest price; buyers want to pay the lowest price. In most situations, dual agents cannot be fair to both buyer and seller. Since the seller usually pays the commission, the dual agent may negotiate harder for the seller than for the buyer. If you are a buyer, it is usually better to have your own agent represent you.

The only time you should consider using a dual agent is when you can get a price break (usually resulting from the dual agent lowering their commission). In that case, proceed cautiously and do your homework!

Many people make the mistake by thinking the only way they can get information on a particular home is to call the number on the sign. Most homes are listed with the local multiple listing service – which is a service where all real estate brokers can share information on their listings. With a click of the button, most agents can answer your questions such as purchase price, square footage, bedrooms, baths, etc.

Six Ways A Loan Officer Can Hurt You

4) If the Loan Officer Does not know Money Savings Techniques.
An experienced loan officer will look at your entire home buying needs and financial goals and offer solutions to save you money.

An experienced loan officer should help you avoid many of these mistakes in this report.

5) If the Loan Officer Does not have a Variety of Loan Products.
Maybe a 30-year fixed rate is not for you because you only plan on being in the home for only 5 years. A loan fixed for 5 years then converts to an adjustable rate may be for you. Usually these products offer lower rates meaning lower payments for 5 years.

Maybe you want a no money down loan. Maybe you need a loan where you don’t need to verify income or assets. Maybe you have less than perfect credit and need an alternative loan.

An experienced mortgage banker or broker works with many of the nations largest banks and wholesale mortgage companies to offer you the best programs in the country.

Don’t make the mistake of getting into a mortgage that will not benefit your needs.

6) If the Loan Officer Does not Give you a Written Good Faith Estimate of Closing Costs and a Signed Interest Rate Lock Agreement.

Always get a copy of your Good Faith Estimate along with the booklet – “Buying Your Home – Settlement Costs and Helpful Information.” This booklet is from the U.S. Department of Housing and Urban Development. Mortgage lenders are required to give you a copy of this within 3 business days after application along with the Federal Truth and Lending Disclosure.

AND NEVER SIGN ANY BLANK PAPERWORK!