Posted on: 15th Sep, 2005 11:55 pm
If you are preparing to buy a home of your own, then check out these top 12 home-buying mistakes that most people make. Being aware of these mistakes will prevent you from falling into the traps others have.
While everyone makes some mistakes when buying a home, some of the most common mistakes can be avoided if you are prepared. One of the worst mistakes you can make is to choose the wrong mortgage. But if you know what to not do when looking for a home loan, you'll be able to enjoy your home for years to come.
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1. Not being aware of mortgage options
There is a general perception that only those with moderate or high income will be approved for a mortgage. Those with a low income or poor credit avoid going for mortgages because they feel that either they won't qualify, or won't be able to pay the fees and interest associated with them.
However, there are plenty of programs with special features available for borrowers with different income levels. What programs are available depend on the state of the economy and the housing market. What buyers need is a little knowledge of mortgages and their pros and cons to purchase their dream house with the best program available.
However, there are plenty of programs with special features available for borrowers with different income levels. What programs are available depend on the state of the economy and the housing market. What buyers need is a little knowledge of mortgages and their pros and cons to purchase their dream house with the best program available.
2. Find a home without pre-qualification or pre-approval
The first thing anyone aspiring to homeownership should do is get prequalified/preapproved for a mortgage. This will help you learn how much you can afford before you go shopping for your dream home. Make sure that when you get prequalified/preapproved for a certain loan amount, you get a letter from the lender specifying how much you are approved for as this will speed up the home buying process.
3. Not shopping around for the best lender
Borrowers usually try to get loans from the lender who offers the lowest interest rate but ignore the other costs like the APR, loan processing fee, and other closing costs. The lender's reputation and the services they offer are also worth considering.
4. Buying a home without a home inspection
A home inspection is one of the most important steps when buying a home. Home inspection helps you find out how much damage has been done to the property and how much it will cost to repair. If the inspection report estimates that the repairs are more than you can afford, you may be able to get out of the contract without losing your earnest money. Most lenders, including those offering FHA loans, require a home inspection before they'll give final approval to your loan.
5. Making verbal statements
Lenders and real estate agents often make oral promises they can't guarantee will be part of the contract for a deed. You need to make sure that any promises are guaranteed in writing and conform with your state's law before you sign the contracts.
6. Signing documents without checking
Because brokers are paid by the number of people they sell loans too, they rarely give their customers the opportunity to read the loan agreements at closing. Therefore, you should ask your broker to send you copies of the agreement before closing so you can read them before signing.
7. Not getting a Good Faith Estimate
Before signing the mortgage agreement, you should understand what fees are associated with getting the loan, such as the document preparation fees, the public notary fees, etc. So before you sign the mortgage, get a Good Faith Estimate (GFE) from the lender. The lender should be able to provide you with a GFE within 3-7 business days of applying for the loan.
8. The rate-lock is not made in writing
If you are getting a mortgage, you should get a rate-lock agreement from your lender that will specify the interest rate, how long the rate lock will last, and any other details you desire. This is especially important if you are agreeing to an adjustable rate mortgage (ARM).
9. Locking in at a low interest rate
The majority of buyers wait for market rates to dip before going for a mortgage. But, it's hard to predict how long a certain interest rate will last before the market conditions allow lenders to raise them again. Therefore, the moment you find an interest rate you can afford you should lock into it.
10. Use an agent who represents both buyer and seller
Only a few agents represent both buyers and sellers. Most agents specialize in representing one party. One of the worst mistakes you can make is to hire an agent who represents both. You need to have an agent who will solely represent your interests.
11. Terminating the lease on the date of closing
If you are renting a home, you need to make sure the lease terminates after you move into your new home. Even though this may mean that you may be paying a mortgage and rent in the same month, it will protect you if there are delays in closing or moving.
12. Shopping for home insurance just before closing
Few sellers will accept an offer if you don't have funding ready. If you are unable to get a loan, you may lose your earnest money and the house of your dreams. Therefore, the best time to start shopping for a loan is the minute you decide you want to buy a home.
While everyone makes some mistakes when buying a home, some of the most common mistakes can be avoided if you are prepared. One of the worst mistakes you can make is to choose the wrong mortgage. But if you know what to not do when looking for a home loan, you'll be able to enjoy your home for years to come.
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Hi anonymous_in Texas,
It may take around 45-60 days after applying for mortgage to go to closing. However, it may even vary. As far as I know, yes, the seller, should offer a copy of CC&R's to buyer to review before closing.
It may take around 45-60 days after applying for mortgage to go to closing. However, it may even vary. As far as I know, yes, the seller, should offer a copy of CC&R's to buyer to review before closing.
In your opinion owning a primary residence in Illinois -would it be wiser to buy a second home in Florida as investment property or a vacation home or second home? I was told that an investment property offers tax write offs but it also kicks the points up where a vacation home would not. What do you suggest?
Hi marla,
As far as I know if you use your vacation home for personal purposes for a specific number of days as your income, IRS will consider this as your residence. On the other hand, if you rent it all through the year the IRS will consider it as your investment property or rental property. If it is used as your residence, you can deduct your mortgage interest from your taxes. This will not be possible if the home is not used as your residence and is considered as your investment property or rental property. The interest rates on mortgages against investment properties are also higher than that against properties used for personal purposes.
As far as I know if you use your vacation home for personal purposes for a specific number of days as your income, IRS will consider this as your residence. On the other hand, if you rent it all through the year the IRS will consider it as your investment property or rental property. If it is used as your residence, you can deduct your mortgage interest from your taxes. This will not be possible if the home is not used as your residence and is considered as your investment property or rental property. The interest rates on mortgages against investment properties are also higher than that against properties used for personal purposes.
My wife and I were in contract to buy a condo. It was a new construction that was not complete. Standards were changed by the banks by the time it was ready. Therefore we were not approved for the loan. The builder is saying because there was no contigent on getting the loan, we should then buy the condo in cash and they will not release our deposit. What can we do in this situation if we did not even have the cash to pay in full?
go get a lawyer, quickly. why there would have been no contingency clause in your purchase contract is beyond me, and you need legal assistance to rectify this situation. if you have the cash with which to purchase the property, well hallelujah, but if you don't, then you're in a jam and it needs to get straightened out quickly.
I signed a rate lock agreement on 5/31. But they did not take the money out of my account. And notified me on 7/20 that it was not taken out. The Rate lock expires on 7/27. What are my rights? Am I bound by this agreement. He said I did not have to pay it. I will not be able to close until August 12. Now they are saying that 4.62 which I locked in at is the lowest I can go.... but if it goes up . I will be charged that. Is the fair. Or is my rate lock invalid. At this point the interest rate has gone down to 4.5.
I want to pay the rate lock fee and get the now lower rate.
I want to pay the rate lock fee and get the now lower rate.
i had a person whom was living with me and who is also on the loan walk away july 2011 and hasnt paid anything.mortgage asked for a quit claim deed from him i got that now they say i need a excise affidati and then have it filed.will they be able to work with me then and lower my mortgage payment in half.if not what can i do.this is the roof over my son and my head and i have no money saved to go anywhere.i have been trying to work with them since july 2011.this is really weighing heavy on me.please help in anyway you can.thanks
Hi Janice,
It will depend upon the lender whether or not they will ready to work with you so that you will be able to lower your mortgage payments. You should contact a real estate attorney and he will let you know more about the affidavit. You should negotiate with the lender for a loan modification and this will help you in getting better rates to pay off the loan.
Thanks
It will depend upon the lender whether or not they will ready to work with you so that you will be able to lower your mortgage payments. You should contact a real estate attorney and he will let you know more about the affidavit. You should negotiate with the lender for a loan modification and this will help you in getting better rates to pay off the loan.
Thanks
Some mistake of home buying are:
1. Not make proper document
2. Not choose proper location
3. Not consult with trusted agent
1. Not make proper document
2. Not choose proper location
3. Not consult with trusted agent
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