Buying a home can be a complex process, and some homeowners find themselves with a mortgage that doesn’t work for them, or home repair problems that they can’t afford. A little work up-front can save you years of headaches and thousands of dollars.
Home buyers need at least a credit score of 620 to qualify for a loan. The higher your credit score the better the rate and terms of the loan. Some new buyers will not find their latest credit score, make an offer on a home, put earnest money down, and then try to qualify for a loan. If anything has changed your score to a lower number than what you were expecting, it could terminate the agreement, and you could lose all of the earnest money you deposited.
Even if you know your credit score, lenders factor in many other financial variables that could raise or lower the amount they are willing to lend. The best way to know how much home you truly qualify for is to get pre-approved by the lender. Nothing can be worse than finding the perfect home only to find out later that you can’t qualify for it. A mortgage broker can shop for the best interest rate and terms that fit your situation. You can then shop confidently with your pre-approved amount.
Sometimes, in an effort to get that home no matter what, first-time buyers may be tempted to not pay for an inspection. Structural and other necessary home repairs can dramatically increase your initial costs.
A home inspection is a must for all home buyers. Sellers should expect it.
An inspection should be done by a certified inspector who is trained to find problems with the foundation, the roof, plumbing, heating and air conditioning, electrical, and the presence of mold or pests. If any problems exist, you may get the seller to pay for them. If not, you will need to consider the costs and decide to move forward with the purchase or back out without penalty.
It is best to work with an experienced and reputable real estate agent to help locate a home and negotiate on your behalf. A real estate agent will understand market trends, home values in the area, and how competitive other buyers are at the time.
In a highly competitive climate, you do not want to try to start with a low ball offer. If you really want the home, your first offer should be at the fair market value for the home. If for some reason your offer comes in too low, or negotiations go back and forth too long, the seller will often find a buyer with a better offer and you end up losing your home over a relatively small amount of money.
Whatever you or your real estate agent negotiates, get it in writing. Verbal agreements are not binding and you will most likely lose if it comes down to a legal battle.
Nothing will kill a home loan closing faster than a change to your credit situation. While your loan is processing, buying a new car on credit can be just as damaging as opening a new account at a local furniture store. Put off opening new credit accounts or making major purchases until after your loan closes and you have the keys to your new home.
If you can avoid these mistakes and keep learning all you can to help protect yourself, you will come out well and soon you will be living happily in your first home.
We’d love to help get you into your first home. Let’s get you pre-approved.