17.5 Mistakes Buyers Make When Buying a Home

Top Mistakes Buyers Make When Buying A Home!

Don’t be your own enemy!
By: Jérel Washington

If you are like most people, buying a home will be the largest investment you are ever likely to make. Annual mortgage, taxes, and insurance costs can range from 25% to 40% of your gross annual income. By using the information in my website reference pages, you are well on your way to protecting yourself and making the home-buying process easier, by becoming an informed consumer.

Read, talk to family and friends, and talk to me, a licensed, real estate professional. Even if you are not in the State of New Jersey, I can still help, by referring you to a ranked and Quality-Certified Agent who can assist you in your local market. You will be glad you took the time to understand the process of buying and selling, and to take advantage of a professional referral.

 

Buying a home? DON’T MAKE THESE MISTAKES!!!

1.) Looking for a home without being pre-approved.
One of the most common errors made by home buyers is starting the search without being pre-approved for a home loan. When you start to look, it is important that you know how much you can comfortably spend on a home. Getting pre-qualified for financing will lock down a price range and help prevent you from being turned down after falling in love with a home. It will also save you the stress and strain of having to find a lender while you are against the wall of a “contingent offer” or a “conditional purchase.”

In these times of fluctuating interest rates, it would benefit you to lock in at a lower rate. This could save you thousands of dollars if the rate increases while you are in the process of buying.

2.) Pre-Approval and pre-qualification are two different things.
During the pre-qualification process, a loan officer asks you a few questions, then hands you a “pre-qual” letter. The pre-approval process is much more thorough. – During the pre-approval process, the mortgage company does virtually all of the work associated with obtaining full-approval for your home loan. Since there is no property yet identified to purchase, however, the appraisal and title search are not yet conducted.

Once you are pre-approved, you have much more negotiating clout with a seller. Sellers know you can close the transaction because a lender has carefully reviewed your income, assets, credit and other relevant information. In some cases (multiple offers, for example), being pre-approved can make the difference as to whether your offer to buy is accepted or rejected. Also, you can save thousands of dollars as a result of being in a better negotiating situation.
Most good Realtors® will not show you homes until you are pre-approved.

Being pre-approved shows you are serious about buying a home and not a Lookie-Loo. If, however, you are just looking to gather information, most Realtors will gladly provide you with that information. Just let us know up-front. This will prevent us from wasting your time, and even the seller’s time, allowing us to put our focus where it is most needed. Many mortgage companies will help you become pre-approved with little or no cost at all. They will usually need to check your credit and verify your income and assets.

3.) Letting your Emotions Cloud Your Judgment.
Buying a home is a tedious yet exhilarating process! It is important not to let your emotions get the best of you and cloud your judgment, such as not being realistic as to whether or not you can really afford to make your mortgage payments comfortably. Be sure not to get so excited that you get in over your head. Use your Realtor as a sounding board to help you and your family consider all of your options.

4.) Failing to seek out the Services of an Experienced Real Estate Agent.
Many Buyers are unaware that in almost every case the buyer is not responsible for paying the agent’s fees; the agent is being paid a commission from the seller. It is always best to seek out an experienced real estate agent that can use information regarding recently listed and sold properties to get you the lowest price possible.

5.) Making verbal (oral) agreements!
If an agent tries to make you sign a written document that is contrary to their verbal commitments, don’t do it! For example, if the agent says the washer will come with the home, but the contract says it will not–the written contract will override the verbal contract. In fact, written contracts will almost always override verbal contracts. When buying or selling real estate, abide by this maxim: Get it in writing!

6.) Choosing a lender because they have the lowest rate, but not getting a written good-faith estimate.
While rate is important, you have to consider the overall cost of your loan. Pay close attention to the APR, loan fees, discount and origination points. Some lenders include discount and origination points in their quoted points. Other lenders may only quote discount points, when in fact there is an additional origination point (or fraction of a point).

This difference in the way points are sometimes quoted is very important for you to understand. One lender will quote all points, while another lender may disclose an extra point, or fraction thereof, at a later time–an unwelcome surprise.

Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate (G.F.E.) of closing costs. You may want to consider requesting a GFE from a few lenders BEFORE submitting your application to any of them. With a few GFEs to compare, you can get a feel for which lenders are more thorough, and you can educate yourself regarding the costs associated with your transaction. The GFE with the highest costs may not indicate that a particular lender is more expensive than another–in fact; they may be more diligent in itemizing all fees than the lenders you thought had lower quotes.

The cost of the mortgage, however, should not be your only criteria for going with a particular lender. There is no substitute for getting referrals from family and friends, and for interviewing prospective mortgage companies. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise.

7.) Choosing a lender just because they are recommended by a friend or Realtor® is a mistake!
Your Realtor is not a financial expert and your friend may not be either. He or she may not know which loan is best to recommend for you. Your Realtor® gets a commission only when your transaction closes, not paid by the lender but by the seller, in most cases. As a result, the Realtor® may refer you to a lender who they feel comfortable will close your loan, but who may not have the best rates or fees. It is your responsibility to get a list of Mortgage companies and find the one that best suites your needs.

Although most Realtors® are professional and concerned about your best interests, you should do your own homework. I recommend shopping for a loan with at least three mortgage companies before you make a decision. If you come to me, without having chosen a lender yet, it is my practice to give you a list of two or three that I have worked with personally. There are countless stories of consumers who ended up paying higher rates, or got a loan that wasn’t right for them, because they blindly followed their Realtor’s® advice.

8.) Not getting a Rate-Lock in writing.
When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.

9.) Using a Dual Agent: an agent who represents the buyer and seller in the same transaction.
Buyers and Sellers have opposing interests. Sellers want to receive the highest price; buyers want to pay the lowest price. In most situations, dual agents cannot be fair to both buyer and seller. Since the seller usually pays the commission, the dual agent may negotiate harder for the seller than for the buyer. If you are a buyer, it is usually better to have your own agent represent you. This is my personal recommendation.

10.) Not Being Informed Of Your Rights & Obligations before And During Your Offer To Purchase.
It is of the utmost importance to be aware of your rights and what to expect from a competent real estate agent. A small mistake in a condition or clause could end up costing you time and money, or in some cases even void your contract.

11.) Buying a home without professional inspections.
Would you take the seller’s word that repairs have been made? Unless you’re buying a new home with warranties on most equipment, it is highly recommended that you get property, roof and termite inspections at a minimum. These reports will give you a better picture of what you are buying. Inspection reports are also great negotiating tools when it comes to asking the seller to make repairs or lower the selling price. If a professional home inspector states that certain repairs need to be made, the seller is more likely to agree to make them.

11a) If the seller agrees to make repairs, have your inspector come back to verify the completed work, prior to the close of escrow. Do not assume that everything will be done as promised.

12.) Failing to Use a Home Inspection Company.
Buying your home is often the most important investment and financial transaction that you will ever make. A home inspection can save you hundreds or even thousands of dollars and unexpected problems down the road. In addition to the inspection, it is often a good idea to request some type of Home Warranty to cover the appliances that come with the home. It is wise to warranty any appliance over 5-7 years old. They will fail at some point.

13.) Not shopping for home insurance until you are ready to close.
Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and find they have no time left to shop around. This puts you in a bad position and usually the Mortgage Company will add their insurance on your loan. This insurance is typically 30-50% higher than insurance you could have gotten on your own.

14.) Signing documents without reading them.
DO NOT sign documents in a hurry. As soon as possible, review the documents you will be signing and again at close of escrow–including a copy of all loan documents. This way, you can review them and get your questions answered in a timely manner. Do not expect to read all the documents during the closing. There is rarely enough time to do that. As your realtor, I will make sure you have as many documents beforehand as possible. This will give you enough time to review them and jot down any questions before closing.

15.) Making moving plans that don’t work.
You expect to move out of your current residence on Friday and into your new residence over the weekend. Also on Friday, your lease terminates and the movers are scheduled to appear.

Friday morning arrives: bags packed, boxes stacked, children under arm and the dog on a leash; you’re sitting on your front door stoop awaiting the arrival of the movers. Your phone rings. Your loan closing is delayed until the following Tuesday. The new tenants turn into your driveway with a weighted-down U-Haul and the movers pull up across the street. You ask yourself:

  • Where in the world is the nearest Motel 6 and storage facility?
  • How much will the movers charge for an extra trip?
  • Can we afford it?”
  • How can you avoid such a disaster?

Cancel your lease and ask the movers to show up five to seven days after you anticipate closing your transaction. Consider the extra expense of an insurance policy. You are buying peace of mind-and protecting yourself from expensive delays.

16.) Not Understanding the Common Negotiating Methods Used At Offer Time.
Some buyers have been told that the best way to get a good price is to low-ball the seller from the start, in hopes that the seller will drop their price in their counter offer. In reality this often does nothing more than upset the seller and will probably exclude you from future consideration. You can end up ruining the chance of an acceptable offer to both parties involved. Have good communication with your agent, and they will be able to instruct you on the many proper ways to negotiate a deal, while still getting you the best price available. Keep in mind that today most buyers are more educated than in previous years, having access to the Internet and various other sources. Remember also that Sellers have access to the same sources. These days, everyone is more educated as to the process of buying and selling property, so let your Realtor guide you through this process of Best Practices.

17.) Failing to Know or Research The Market Before Making Your Offer.
Have your agent prepare all the area sales and properties comparable in your area and get a copy to look over before you make your offer. This will help to ensure that you do not overpay for what the home is actually worth. In most cases, this is the same information the seller saw when setting the price of their home.

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