Over the last month we have had several inquiries about Pre-Sales. A Pre-Sale is a home that is purchased either prior to construction commencing or during construction with a delay in closing
Watch Out! – 14 Things to Avoid Before Buying a House
Dated: October 23 2018
Many first-time home buyers are surprised to discover just how many ways you can mess up a home purchase. You may have got your pre-approval, found a home you loved and made an offer. But if you want to avoid messing up the transaction, you will need to be extremely careful until the sale has closed.
Use the following tips to protect yourself and your home purchase.
1. Don’t miss loan payments.
You must keep your payments current on all your loan accounts, including credit cards and car loans. The lender will look at your credit again before finalizing your mortgage, and if you have missed any payments, it may lead to you losing the loan.
Many buyers mistakenly believe that once the lender issues their loan commitment, they are golden. This is NOT the case!
2. Be careful before you consolidate your debt.
Debt consolidation can be tempting when you finally start looking at buying a home. Most consolidation offers make it possible for you to bring all your debt under one umbrella payment, which makes sense for some people.
But there are also often hidden fees and interest rates that can increase dramatically without warning. Consolidation may not improve your credit in the way you expect, so be sure to read all the fine print.
3. Avoid changing jobs.
It goes without saying that changing jobs is not something you should do in the middle of purchasing a home! One of the things lenders look closely at is your employment history. They want to be sure that you are financially stable and capable of making your loan payments.
4. Don’t shift your finances around before getting the loan.
When a lender pre-approves you, the approval is based on the current state of your finances. You want to maintain that state – the one that got you the pre-approval – at all costs. Sometimes buyers make the mistake of shifting their money around to better position themselves, but this is a mistake.
5. Don’t start banking at a new institution.
Your bank may have made you angry or upset. Or maybe you saw a great offer from a competing bank that you just can’t pass up. Well, you do need to pass it up, because changing banks before getting your loan can disrupt everything.
Just like the job and the finances, your banking history and status is part of the equation that leads to you getting pre-approved. Change your bank, and you may not get final approval.
6. Avoid buying a car.
Without a doubt buying a car while also purchasing a home is a common mistake. Doing so is also at the top of the list of what you shouldn’t do before buying a home. Sometimes the feeling of knowing you are finally going to get a home of your own can be so exciting that you start looking at other ways to improve your life – like buying a car.
Unfortunately, purchasing a car can throw a wrench into your home buying plans. Your loan pre-approval was based on the state of your credit and your debt load at the time of pre-approval before you bought a car. Adding the debt that the car purchase will bring may make you unable to get the loan for your home.
7. Don’t buy furniture or household goods on credit.
Another mistake many home buyers make is using credit to start preparing for their new living arrangements. You may want to start buying furniture and appliances to fill up your new home and make it truly yours, but hold back.
Taking on new debt, even for furniture or other household related items, will change the state of your credit and may throw up a flag for the lender that leads to the loss of your loan approval.
8. Avoid making large deposits into your bank account or making cash deposits.
Money that appears suddenly in your bank account makes lenders uneasy. In fact, they prefer for you to have the money that is going to your down payment in the same account for at least two months.
9. Avoid lying or stretching the truth on your loan inquiry.
You may have no intention of lying about your finances when you fill out a loan application, but the point needs to be stated regardless. Lying on a loan application is fraud, and if the lender finds out that you mislead in any way, you will almost certainly lose your loan.
10. Don’t let anyone make inquiries into your credit.
Any time you apply for a credit card, a loan or even try to sign up for a new service, like a cell phone service, the company you are working with will probably make a credit inquiry. They do this to determine if you are a safe risk, much as the mortgage lender does.
One mortgage myth worth knowing – having your credit checked by multiple lenders when buying a home does not affect your credit score all that much.
11. Don’t spend the money you are going to use to cover closing costs.
For many home buyers, the period surrounding the home purchase is one of financial scarcity. Money may be tight right now, which can make the money you saved to cover closing costs tempting. But avoid spending it.
12. Don’t overextend yourself.
When buying a home, lots of lenders will gladly give you what they think you can afford on paper. What you qualify on paper, however, doesn’t necessarily mean what you’ll be comfortable living on day to day.
13. Avoid being a co-signer for anyone.
When you co-sign a loan, you are obligating yourself financially. It does not matter that you are not the primary person on the loan. If the lender needs money and is unable to get it anywhere else, it will come looking for you to pay.
14. Don’t spend more than the value of the home.
There are times when real estate markets become extremely hot! In real estate jargon, we call this a “seller’s market.” Most of the country has been experiencing these conditions over the last few years. Buyers have been put in the position where winning bidding wars are the norm, not the exception in many places.
When involved with multiple offers it is not uncommon for the sale price to be pushed significantly above asking. While the buyer may be willing to do this, a lender may not.
As you can see it can be easy to make mistakes when getting a mortgage especially when you are a first time home buyer. Hopefully, you have found this information useful and won’t make one of these financial blunders.
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Move Okanagan Real Estate
Annette has been in Real Estate since 1994. Her determination to uphold a tradition of trust, integrity, and expertise has earned her a long list of satisfied clients who recommend her at every opp....