Eight Common Mistakes

Buying a home can be a lot like losing weight (all the more so if it’s your first home) in the sense that people end up doing and buying some pretty dubious things. But while desperate dieters might waste money on “miracle” weight-loss pills or near-useless exercise equipment, misguided home buyers could be doing far more serious damage to their financial situation—like undermining their ability to purchase a house at all. The Cascade Team is here to shed light on some of the dumbest reasons people become unable buy a home. The good news? These flubs are easily avoidable. Read on and be aware.

Mistake 1: Delaying your search for financing
Your first step in the home-buying process should be to meet with a mortgage lender to discuss your financing options. Nobody truly knows until they meet with a lender what they can afford. In other words, just because you think you can buy a $1 million house doesn’t mean you can actually get a loan for such an amount.

Mistake 2: Using a questionable mortgage lender

The mortgage industry is interlaced with scams—including a host of fake or unreliable lenders. Placing your trust in a bad lender, or a lender with a history in the market for not being able to close on time, (which can cause a deal to fall through) is a misguided move. It explains why on occasion sellers reject offers because of the lender the buyer is using. If an agent listing a home has had repeated bad experiences with a particular lender, they will likely share this with the seller. To make sure your financing is rock-solid, ask your real estate agent for lender recommendations instead of jumping to Google. And read up to know your mortgage basics.

Mistake 3: Getting pre-qualified rather than pre-approved
Pre-qualification and pre-approval might sound similar, but they’re not. Essentially, anyone can get pre-qualified for a loan because doing so only involves having a conversation with a lender about the state of your finances (no documents are exchanged). Getting pre-approved involves the lender gathering all necessary documentation—your tax returns, bank statements, pay stubs, and more—packaging the loan, and submitting the file to an underwriter for review. If everything checks out, the lender will issue you a written commitment for financing up to a certain loan amount that’s good for up to 90 or 120 days. Properly educated sellers won’t even entertain an offer unless the buyer has a letter of pre-approval.

Mistake 4: Looking beyond your price range
It sounds obvious, but some home buyers just find it difficult to stick to a budget. Therefore, resist the temptation to shop online for homes that are simply outside your price range (i.e., the amount for which you’ve been pre-approved).

Mistake 5: Making below-list offers
You need to rely on your real estate agent to help decide whether a house in which you have an interest has a fair listing price. (Your agent will do this by developing a comparative market analysis (CMA), which entails looking at recently sold properties that are comparable to the house that’s up for sale.) If a home is priced well, especially in competitive markets like the Seattle Metro area, San Diego and Denver, not only does it seem wise to offer full price, but in many cases to include escalation clauses or even start your offer over asking price. A good agent will know the market into which you are buying, and help you through the decision on how to make the best possible offer to win the home.

SEE: Winning In Multiple Offer Situations

Mistake 6: Writing a poor personal letter to the seller (This is covered in the link above) If you’re competing against other buyers, writing the seller a personal letter can help strengthen your offer. But some home buyers are inclined to overshare, in which case a letter can actually hurt your offer.
Stick to the fact that you love the house and the neighborhood, don’t get into personal details such as the fact that you’ve lost out on other homes or want to remodel the dated kitchen. Making yourself seem to desperate can set you up for a counter from the seller that can cost you thousands extra.

Mistake 7: Making a large purchase while in escrow

Some home buyers make the mistake of opening new credit accounts while they’re in the process of buying a house. But purchasing a big-ticket item like a car or a boat while you’re buying a house can jeopardize your financing. Why? Because your mortgage lender’s underwriter is going to re-evaluate your finances and recheck your credit report shortly before closing in order to determine that you’re still able to qualify for the loan.
Even buying a fridge can throw off your credit or debt-to-income ratio. So as a rule of thumb: Don’t make any type big purchases until after you close on the house.

Mistake 8: Failing to have funds for closing costs
If you don’t have enough cash to cover closing costs, you won’t make it to settlement; and if that becomes the case, you could lose your earnest money deposit. Thus, make sure to get an estimate from your mortgage lender of what your closing costs will be before making an offer on a property (currently, this is legally required—just make sure to read it).
Closing costs vary widely by location, but they typically total 2% to 7% of the home’s purchase price. So on a $250,000 home, your closing costs could come to $5,000 to $17,500. Both buyers and sellers usually pitch in on closing costs, but buyers take on the greater portion of the load (3% to 4% of the home’s price) compared with sellers (1% to 3%), so you need to make sure you have enough cash on hand to pay your portion.

SEE: What Buyers And Sellers Pay For Closing Costs?

The Cascade Team Real Estate is a company like no other because of the marketing, service and home seller savings we provide. We understand that in today’s real estate & home selling environment, we need to provide a high level of real estate service and wide spread marketing of the home for sale, utilize technology to keep our home seller clients in the communication loop and provide added value to both buyers and home sellers in the real estate transaction. The effective use of technology tools allows our local Seattle & San Diego real estate agents to focus more of their time on servicing our clients and finding buyers for your home, all the while providing the most comprehensive real estate marketing program available. In the end, you get the perfect combination of online real estate tools and personal service in the home selling process.


Leave a Reply

Your email address will not be published. Required fields are marked *