- Not getting a pre-approval before looking at homes.
Getting a preapproval before shopping for a home is important to save time and money. For one, you will know beforehand that you are not wasting your time looking at homes that are too expensive for you to be approved for. You might be able to get a general price range based on your income and by knowing how much you want to spend on a mortgage every month, but the amount you want to spend on a home may be significantly more than a lender will approve you for.
Two, this allows you some time to shop around. You want to check with at least three lenders before deciding on one. I recommend your check with your bank or credit union, a different bank than your own and with a mortgage broker. If you go and look at a house without having shopped around or getting preapproved and want to make an offer, your time is now limited in choosing a lender to work with. This is especially true if you live in a competitive market.
- Forgetting to factor in other expenses.
Many first-time buyers overlook the additional expenses involved in a mortgage payment. Taxes, property insurance, mortgage insurance, HOA fees and higher utility bills are just a few things you will need to factor into how much you can afford.
You will also want to budget for annual maintenance and emergency maintenance savings. Purchasing a home warranty at closing may help cover some of these expenses, but you will need to add that to your budget as well.
- Not getting references or referrals for Real Estate Agents.
I’ll be the first one to tell you Real Estate is all about the referral. I know that my family, friends, and clients will be my biggest source of business. You should look to your family and friends for an agent they know or have worked with.
If you don’t have any agents referred to you and need to choose one be sure to ask for references or check them online. It may also be a good idea to speak to 2 or 3 agents before deciding on one. Because home buying can be an emotional time in your life, you want to work with someone you feel a connection to.
- Completely draining your savings.
While putting down 20% is a good thing, as it can save you on having to pay for mortgage insurance and lower your overall monthly payment, you should still have an emergency fund available to you.
It’s always wise to have savings set aside for the unexpected, it’s even more so when you own a home.
- Financing a purchase before your closing.
Congratulations! You were preapproved, made an offer on your dream home and it’s excepted. Closing is in 30 days and you want to celebrate. Maybe you decide to purchase some new furniture for your home or buy a new car. Don’t finance it if you don’t have to, and if you do, wait until after closing or risk killing the deal.
I’d also suggest not to open and new credit cards during this time either. During the closing process, the lender will be pulling your credit one final time to verify and just a single new inquiry on your report could mean not being approved for the loan.
So, are you considering purchasing your first home soon? Have your purchased before and have a story to share? Please tell me in the comments below.