March 28th, 2020 1:19 PM by Sam Kader
1. Looking for a home before applying for a mortgage. This mistake will put you behind the ball if a home that you love hits the market or you look at homes that you can’t afford. What to do instead is before you fall in love with that gorgeous dream house you’ve been eyeing, be sure to get a fully underwritten Pre-Approval from us first.
2. Talking to only one lender. First-time buyers might get a mortgage from the first lender or bank they talk to. What to do instead is to shop around with at least three different lenders as well as a mortgage broker. Compare rates, lender fees and loan terms taking into account customer service, lender responsiveness and ability to close on time; all play key roles in making the process run smoothly.
3. Buying more house than you can afford. It’s easy to fall in love with homes that might stretch over your budget but overextending yourself can lead to regret and worse later if you fall on tough financial times. What to do instead is to focus on what you can afford rather than fixating on the maximum loan amount you can qualify for. Factor in your other obligations that do not show up on a credit report when determining how much house you can afford.
4. Moving too fast. Buying a home can be complex especially when you factor in the mortgage process. What to do instead is to map out your home buying time-line at least a year in advance. Keep in mind that it can take months even years to repair poor credit and safe enough for a sizeable down payment. Work on boosting your credit score, paying down debt and saving more money to put you in a stronger position to get Pre-Approved.
5. Draining you savings. Spending all or most of their savings on the down payment and closing costs is one of the biggest mistakes first-time homebuyers make. Some people scrape all their money together to make the 20% down payment so that they don’t have to pay for monthly Private Mortgage Insurance (PMI) but that strategy left them with no savings at all. What to do instead is to aim for three to six months of living expenses in an emergency fund. PMI is not as bad as you think nowadays. I can help you with as little as 3% in down payment and lower PMI than average.
6. Being careless with credit. Lenders pull credit reports at Pre-Approval to make sure that things check out and again just before closing. They want to make sure nothing has changed in your financial picture. Any new loans or credit-card accounts can jeopardize your closing. The goal is to keep the status quo in your finances un-change from Pre-Approval to closing. What to do instead is don’t open new credit cards, close existing accounts and make large purchases on existing credit accounts in the months leading up to applying for a mortgage through closing day.
7. Fixating on house over neighborhood. Sure you want a home that checks off the items on your wish list and meets your needs. Being nitpicky about a home’s cosmetics can be shortsighted if you wind up in a neighborhood you hate. The goal is to find you and your brood a place where the culture and the values of the area match yours. You can always trade up or down for a new home and a third bathroom or renovate a basement. What to do instead is to ask your real-estate agent to help you track down neighborhood crime stats and school ratings. Measure the drive from the neighborhood to you job to gauge commuting time and proximity to pubic transportation. Visit the neighborhood at different times to get a sense of traffic, neighbor interactions and the overall vibe to see it it’s an area that appeals to you.
8. Assuming that you need a 20% down payment. While 20% down payment help you avoid paying Private Mortgage Insurance (PMI), many buyers today don’t wait and put down less than 20%. What to consider instead is to put as little as 3% down for a conventional mortgage or 3.5% down for an FHA financing. I will help you navigate which option best suits you since each loan program has its defined constraints that you must qualify for.
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