Buying a new home is not something we do quite often, but it is an amazing experience. As much as you are happy with that decision and opportunity, this job is still quite stressful, especially if you are buying a house for the first time. Don’t be discouraged by the fact that you can’t find the ideal house or take out a loan right away in the same week you decided on this move. This is a job that requires patience and a clear mind.
Buying a home will probably be the most rewarding and biggest investment of your life. That is why everything must go well. If you do not have much experience with this, there is a great possibility that you will make mistakes such as losing the best offer, overpaying the house or taking a high interest, etc. If you are not sure that you can handle this on your own, it is best to seek help from a professional.
Practice tells us that many customers are aware of mistakes only after they make them, and in order not to stop this from happening, we have singled out for you 6 big financial mistakes to avoid when buying a house.
1. You didn’t make sure you got prior approval
If you want the sellers to take you seriously when it comes to real estate, then it is best to get a preapproved for it. What does that mean?! This means that you will receive a letter of prior approval as a mortgage application even before you have chosen your dream home. To the sellers, this letter is in a way a guarantee that you will have enough money to pay for the property and that you are ready to do it.
This letter is not like the prequalification you receive as an assessment of the conditions given to you by the lender. To give you prior approval, lenders must withdraw your credit report. With this letter, real estate agents and sellers will give you full attention and time.
2. You hired the first lender
If you have already decided on this big step, then don’t make a deal with the first lender you came across. Do a little research and compare. The request offers from more than one lender and see all their pros and cons. You will be able to check most offers without a big credit withdrawal. Only pre-qualification will be enough for you.
According to Real Big Group, when comparing these offers, take into account the interest rates, repayment terms, fees. Don’t forget things that are not directly related to finances, such as customer service that will always be available to you and the time speed with which your loan can be processed.
3. You have no idea what the balance on your credit account is
What lenders will encounter first when you decide on this great mortgage loan is your credit score. Before the lender gets acquainted with your credit results, it would be good for you to get well acquainted. This is a very easy procedure that you can do online very quickly and easily. It will be seen here if you are late with the repayment of a small loan, which will not be a favorable circumstance for obtaining a mortgage loan. Check everything, remove all irregularities and if possible remove bad grades if you have them.
4. You have too many debts
Have you ever put on paper and compared how much income you have and how much-fixed debt? This is also an important factor in approving your home loan. It may not be as important as the credit score, but it is very close.
Be brave and put on paper your total income on the one hand, and on the other hand all the monthly payments that you have to make without discussion. This does not include the cost of buying groceries, utilities, but it certainly includes car loans, student loans, other loans you have, monthly credit card payments, etc. When you calculate the balance of total payments that you cannot avoid during the month, divide that amount by your gross monthly income. The lower the percentage obtained, the more desirable you are to lenders.
5. Don’t know how to manage your cash
If you embark on an adventure called buying a home, every penny of cash will be precious to you. Mostly when at one point you have a fine amount of cash in your hands, you start thinking about buying unnecessary things. Be very careful because you will need cash for many things. In the first place is the participation that you will need. But beware here: if you invest everything you have there’s a chance you won’t have it for some other expense.
Further, some loans allow the closing cost of your home to be included in your loan. This certainly means that you will be charged interest on that amount. If you have any cash leftover, it would be much wiser to pay this expense right away.
In addition to the above costs, you must not forget the money you will need to move or renovate a new home. New closets, new paint on the walls, it all requires you extra money to count on.
6. You change job just when you need a mortgage loan
Yes, sometimes a new job entails buying a new house or vice versa. However, this can be a complicated process for obtaining a mortgage. The lender needs to have a stable income to be sure that you can repay your debt. If you have already been granted a mortgage at the expense of your old job and income, changing jobs at this stage may mean a red light and delay the opportunity to take out this loan.
Lenders are required to provide a list of your income for at least two consecutive years. If there have been some fluctuations in average income during this period, lenders will be skeptical. It would be best, if possible, to postpone the change of job for a while.
Read carefully the guidelines we have set aside for you so that you do not sabotage the purchase of the house you have been dreaming about. Some of the mistakes we have listed may seem naive to you, but they can affect this whole process.Sources: