10 Common Mistakes

The Ten Most Common Mistakes Buyers Make* or Home Buyers 101

 

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Look for a house without knowing if, and for how much, they qualify.

   Many potential buyers drive around a neighborhood they would like to live in and come upon "the home of their dreams" only to have their dreams dashed when they find out they don't "qualify" to buy it. Qualifying for a home loan means more than just having a down payment, a job, good credit, and reasonable monthly debt. The educated buyer doesn't find a house first; first, they find a loan that suits their individual situation. Being pre-qualified means a loan officer has evaluated your job security, income, debt, credit history, and cash available. Once a buyer is pre-qualified, they know the maximum they can spend and aren't wasting their time looking at house they can't afford. There is usually no cost for pre-qualification and this simple step can save a buyer thousands. Sellers are much more inclined to negotiate with a buyer who they know can actually get a loan!

 

Fail to determine the maximum monthly payment they want to make.

   Loan options are many and varied, yet they all have one thing in common........a monthly mortgage payment--the check you will write every month, and in most cases for thirty years. Before you buy is the time to consider the most you want your monthly mortgage payment to be. Before you have become emotionally attached to a specific house with a payment higher than you can comfortably live with, or can qualify for. To help you make this decision, you will want to take into consideration the tax savings and benefits of home ownership, as opposed to throwing your monthly rent away.

 

Listen to "well-meaning friends" instead of professionals.

   While your family and friends have the best of intentions, it is better to seek the advice and council of real estate and mortgage professionals. Your friends may have purchased one or two houses in their lifetime, whereas a professional has completed hundreds or even thousands of transactions. The loan your friend used eight years ago may not even be available anymore. The income limits and credit guidelines may have changed substantially since they purchased their home. Because loan programs, and the real estate market, change frequently, it is always best to consult a professional.

 

Call the Realtor "on the sign"!

    Do not call the Realtor whose name is on the sign in front of your dream house! If you do, you are speaking to the person who represents the seller, not you, the buyer. Asking the seller's agent how much the house is worth, its condition, or what the seller is willing to contribute to the transaction, is like asking your spouse's divorce attorney what a fair deal would be for you in the divorce!

 

Fail to review their credit report.

    Before applying for a home loan, it is a good idea to review your credit report with one, or better yet, all three of the major credit reporting companies; Experian (TRW), Trans Union, and CBI Equifax. A lender will review all three reports during the loan process and some will help you correct errors, minor problems, and help explain or even remove derogatory information. Most people have never seen their credit report and are unaware that mistakes appear on up to 60% of them. Reviewing your report ahead of time may save you time, money, or both.

 

Haven't demonstrated an ability to save.

   First time buyers usually end up paying more in a monthly mortgage payment than they paid in monthly rent; the difference between the two is referred to as "payment shock". If a renter is paying $850.00 a month in rent and desires a mortgage payment of $1100.00 a month, the question the lender will have is, if the renter has not been saving any money every month, where is the additional $250.00 a month going to come from? Save on a regular basis. If the renter had been depositing $250.00 in their savings account every month, between the rent and savings, he has demonstrated his ability to make the mortgage payment he is requesting.

 

Make an offer without representation.

   Many buyers shy away from Realtors because they believe the Realtor will cost them more money. Typically, it is the seller who pays for the Realtor, not the buyer. The seller will usually pay his agent, the listing agent (the name on the sign on the front lawn), 6% of whatever the house sells for. If the buyer has his own agent, his agent will "split" the 6%. The buyer doesn't pay his agent - the seller does!

 

Use a "dual agent" as opposed to their own exclusive "Buyer Broker".

   Buyers and sellers have opposing interests. The Realtor "on the sign" represents the seller. Many Realtors represent both the buyer and the seller, a dual agent. How can an agent represent both parties in the transaction equally? Get your own agent! Someone who is there to represent your interests only, a "buyer/broker".

 

"Fall in love" with the first house they see.

    Buying a house is usually an emotional, as well as a financial experience. Whether it's a white picket fence, a walk-in closet, or a work space in the garage, it's easy to get hooked. Make sure you comparison shop, and let your Realtor help you in this area. Realtors are aware of the market, they know value. Most importantly, they will tell you what similar houses in your area have recently sold for and help you make a realistic offer. Shop 'til you drop! You shopped for your TV, didn't you?

 

Don't educate themselves on the home buying process.

   At least learn the "lingo"! While you can count on the skills of your home buying team, your experience will be much more pleasant and rewarding if you know how the process works and what is expected by all involved - including you.

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