Buyers often make mistakes that can cost them thousands of dollars or additional time and disappointment. You can learn from other buyers' mistakes and keep yourself from falling into these problems.
Failing to get preapproved for a loan and making an offer on a home is a lot like driving your car around without ever looking at the gas gauge and thinking, "I know I have enough." I'm sure you can see how that would be an issue. Without preapproval for a mortgage, you may be looking for a home in the $200,000 range "knowing" you can get a loan and afford it. What happens if you make an offer on a $200,000 home, start the loan process and only get approved for $190,000? I can tell you that there is usually the embarrassment of having to withdraw your offer and then the time wasted looking at homes that really weren't within your budget. This can usually be avoided from having a good preapproval on a loan. The best preapproval you can get involves your lender running credit to verify what types of loans and rates they will be able to approve for you. If possible, avoid preapprovals where the lender only goes off of your stated monthly commitments. These run a higher risk of falling through when credit reports and scores are pulled.
In addition to the monthly principle and interest payments (which is what is figured by mortgage calculators), you are going to have monthly payments to escrow (insurance, taxes, homeowners association fees, etc) and closing costs (appraisal fees, title insurance, document fees, etc). Talking with your real estate agent and lender early in the process is key to understanding the real costs behind owning a home and will keep you from being surprised by your true monthly payment.
You may only need a two-bedroom, one-bath home today, but what are you going to need in five years? If you see your needs changing, it's important to think ahead and look at homes that meet your future needs. If you decide in three years that you need a different home, you will be throwing away the money you spent on closing costs, since you will have to go through the mortgage process again.
Failing to purchase adequate insurance for your home can mean significant loss for you if the unspeakable happens. Be sure to work with an experienced insurance agent that can make sure you have adequate insurance coverage for your entire property. Be sure to check and see if the home you are buying is in an area that floods...ever. Even if the area only floods once every 200 years, it can be a good idea to get flood insurance to protect your investment. Floods are not covered under most typical home insurance.
All lenders are not created equal. Whether by lack of experience or lack of caring, some lenders, especially online lenders, fail to explain the entire process and costs to buyers or fail to complete each step of the process in a timely manner, causing delays in closing or potentially loss of the contract. Every lender is required to provide estimated closing costs to buyers, but I have experienced on several occasions where that has not occurred, most typically when buyers chose to use an online lender. My suggestion is to use a local lender. Using a local lender means you have someone to sit down with and go over the numbers, allowing the lender to fully explain everything to you. A local lender can be with you at closing to help you if you have any questions. Using a local lender doesn't mean missing out on good rates either. Some local lenders not only check the rates that they can provide you directly, but also look to see if there are better rates available from a lender on what is known as the secondary mortgage market. If a better rate is available to you by Bank A, your local lender can offer that rate to you. They will go through the entire loan process with you because they are still your lender. After closing, they will sell your loan to Bank A and you will make your payments to Bank A.
Buyers sometimes want to save the money on a home inspection because they don't see anything wrong with the home. The problem with this is that most home buyers are not experienced enough to know what "wrong" really is. Did you check in the attic to see if there is adequate insulation, ventilation and no water damage from leaks? Did you look at all the plumbing and make sure that the drains run at the proper angles and are installed properly? Did you check to see that the electrical outlets are wired correctly and not backwards? Did you look for signs that the foundation may have issues? There are a lot more things that an experienced home inspector will check through the inspection. Inspections can seem expensive, but it can be a lot more expensive to buy a home and the find out there is a major issue with the foundation, plumbing, heating or cooling, roof, etc. Remember that it is even a good idea to have a home inspection on brand new homes. I have seen firsthand several home inspections on new homes that have found more issues than older homes due to inexperienced contractors and city building inspectors.
By limiting your home search to home magazines and online, you may be looking at homes that are already sold. On my web site, I try to have up-to-date information available to you, but the nature of home listings is that anything other than what real estate agents access can be old information. My web site updates listings every day, but if something goes under contract, it could be listed for up to 24 hours. Definitely use these resources, but don't overlook your best resource, an experienced real estate agent.
If you have this mindset, the home-buying process is going to be difficult for you. Start with several properties that seemingly meet your needs, then go view the properties and eliminate the ones that don't meet your expectations. If you don't find a home that works for you, remember that there are new homes being listed every day and to keep your options open. If you work with me, I will sit down with you and help you come up with a wish list, things you want in your home. I will then search available properties for you and get you a list of properties. If we exhaust these properties, I will continue to work for you and search newly available properties as they come in. When new properties match your wish list, I will put together the list and get them to you.
Try to avoid the above mistakes and you'll have a better home-buying experience. To get an experienced real estate agent that will work for you, call me at 417-439-5371 or email me by clicking here.