Home Buying Blunders
Having worked with many buyers, my business partner Marty Snyder (one of Ohio's top Realtors) have put together a list of "Home Buying Blunders" that's a must read for anyone considering buying a home for the first time.
First off I can tell you that half the battle and a lot of the blunders are in preparation or lack thereof:
Home Buying Failures
1. Credit - Putting off making sure your credit in good order is no doubt one item that for many takes the longest. This means paying bills on time, knowing how to manipulate your credit card history, taking care of erroneous information etc.
2. Debt - Getting a handle on debt naturally follows good credit practices. Many new or first time buyers neglect their debt-to-income ratio, not knowing what an important factor in getting pre-approved (which is different than qualified). Generally your debt-to-income ratio should be 28% or lower, to be well qualified. FHA is currently 43% though sometimes can be higher with justification from the lender. VA loan limits are calculated with a debt ratio of 41%. These rules and limits do change, but less debt is obviously a no-brainer.
FHA loans have long been a loan of choice, as they have low down payments, and some FHA loans like a 203k allow funds for repairs or renovations to be structured into the loan (you cannot do the repairs yourself if you're financing, sorry). If money is tight, there are many types of no-down payment and low down payment home loans. A lot of which type of home loan you roll with has to do with the property(s) you're interested in and what type of home is right for you.
The best thing to do after getting your credit up to the mid 600's is to talk with an experienced Realtor to help determine the loan types that are going to be best suited to your needs; new construction, foreclosure or rehab, VA, conventional, etc. An experienced Realtor will have a number of good lenders to refer to you to begin mortgage shopping and comparison.
3. Not getting pre-approved before asking for showings is a huge mistake, Pre-Approval is Pragmatic First of all, no real estate wants to work with someone that has not obtained a pre-approval letter from a lender. Put the shoe on the other foot. Don't be surprised if one of the first questions a real estate agent asks you is "have you talked with a lender yet" and don't be insulted or put-off by that question. As Realtors, it's an integral part of our job to help you connect with lenders that have the loan products best suited for your unique situation.
4. Not Speaking with more than one lender. Did you know that some lenders participate in varying forms of mortgage loan programs that others may not? Did you know that you might be eligible to get a conventional loan with less down payment than an FHA loan? Did you know that you might be eligible for a mortgage with only 5% down payment and not have to pay the nasty PMI every month or even at all? Did you know there are "no money down" programs that might be your best bet?
5. Abusing your credit after getting pre-approved. Don't make the mistake of thinking that you are "good to go" once you have your pre-approval letter in hand. Many home buyers have actually lost out on completing their home purchase due to abusing or using their credit unwisely. It is in your best interest to wait until after you have closed on your home before using any credit at all. Something as simple as a push mower purchase has killed more home purchase transactions than you can imagine.
6. Not having the home inspected by a professional. It doesn't matter if the home is brand new or older. A home purchase is the single most expensive purchase you will ever make. Why take the chance of buying a lemon? Have the house professionally inspected before you close the transaction. Neglecting home inspections can cost you significantly.
7. Buying a home without a professional buyer's agent. Did you know that the seller is responsible for paying your Realtor's real estate commissions? If you enter into a purchase agreement without having the professional representation and protection of having your own Realtor, you could be costing yourself thousands of dollars without just cause. Would you go into a courtroom as a defendant without having your own professional representation? The listing agent promised to net the seller as much as possible. Buyers' agents represent you.