Top First-Time Homebuyer Pitfalls to Avoid
As a mortgage broker, I know that making that first home purchase can be an exciting but also very stressful time. Making a home purchase involves many components and people that need to come together seamlessly in order for the transaction to move along. Knowing what to avoid when beginning that new home search can help you avoid stressful and disappointing moments in your real estate purchase. The following is a list of common pitfalls to keep in mind when buying your first home to help you avoid those unnecessary stressful situations.
Mortgage Pre-Approval
Getting yourself pre-approved for a mortgage is an important step when purchasing your first home. Walking into a home without knowing what value you could be approved to purchase is setting yourself up for heartbreak. Although a home purchase is a huge financial decision, it also contains a strong emotional element. All too often, I have buyers approach me who have already chosen a home, but are unaware of the financial elements that come into play when determining mortgage approval. Prior to looking for a home, speak with a mortgage agent to get your pre-approval. Mortgage pre-approval however cannot guarantee funds will be granted upon full review of financing requirements. It is always advised to maintain a condition of financing on any home purchase you plan to make.
Additional Expenses To Budget For
When it comes to the real estate transaction, many buyers believe that mortgage pre-approval and downpayment are the only two financial factors that come into play. This is not the case, however; new home buyers should also consider elements such as closing costs, as well as funds set aside to operate and pay the mortgage going forward. Financial institutions looking to lend money don’t like to see all of your funds drained in the down payment, and take security in remaining funds to cover future mortgage payments. Closing costs are another factor often forgotten in the real estate transaction. When purchasing a new home, it is advised to have 1.5%-3% of the home value set aside to cover the closing costs associated with the purchase. A mortgage agent is a great resource and can provide information on what type of expenses you should expect to incur in a purchase transaction.
Home Inspection
Having a home inspection completed is a critical step in ensuring your security in the home you are purchasing. It is however, another cost associated with the purchase. In our current competitive BC real estate market, conditions of inspection are often waived as buyers fear they will lose the home they have fallen in love with. Although understandable, I always advise my clients to maintain that clause despite the potential of losing the home. A home inspection done by an expert is invaluable in the information and possible cost savings it can provide. A home inspector is trained to evaluate a home's condition, whether that home be a new build, or even a century home. The information gathered in the inspection can provide insight into possible issues with the home, future repairs that may be required, and even health related issues such as mold that could be of concern. All of this information can be used to help you prepare for future costs, or avoid a costly mistake.
Using the Sellers Real Estate Agent
When searching for a real estate agent to aid in a home search, I often see clients make two common mistakes; using the seller's agent, or using an agent unfamiliar with the area of purchase. It is never in your best interest to use the same real estate agent that the seller is using, for many reasons. A real estate agent, while bound by a code of ethics, cannot truly maintain neutrality when it comes to representing both the seller and buyer in a real estate transaction. As a buyer you must remember that the real estate agent is already working with the seller, and has developed a relationship with the seller long before you came along.
When looking for a real estate agent to represent you in a home purchase, it is best to locate one who is familiar with the area in which you are looking to make your purchase. Using an agent recommended by your family or friends or an agent you’ve used in the past may not always do the trick; always consider the area they service. Although data on home values and sales is available to all agents, nuances regarding the city, town, or neighborhood you are looking to purchase may be lost on an out of town agent.
Making Financial Changes Before Closing
Your financial and credit history are other major factors that come in to play when searching for home financing. As a result, changes to your finances or credit prior to purchasing a home can jeopardize your ability to secure mortgage financing. When it comes to mortgage approval, lenders are searching for a couple key elements. When reviewing your credit, a stable history with no derogatory tradelines, including two trade lines in good standing with a full 2 years of payment history. Lenders will also review your employment history to ensure a stable job with good, consistent, income. When beginning your search for a new home, avoid making large purchases if at all possible. Many home buyers are often tempted to begin searching for new furniture, or upon pre-approval, make a major purchase such as a new car. If for any reason, the lender is required to pull credit again during the approval process, this could spell disaster for your real estate transaction.
If you have any questions about purchasing a home, or need tips and advice regarding the mortgage process, give me a call! I would be happy to walk you through the process and get you started on your home buying journey!
