Ten Common Home Buying Mistakes

Shopping for houses without a pre-approval:
Of course a mortgage company would say that right? True, but how strong will your negotiating be with the seller without one. Are you Pre-Approved? Is the first question most sellers and Realtors will ask you before even talking about a deal. Another benefit is during the pre-approval process, the mortgage company does virtually all the work associated with obtaining a full approval. Mortgage companies will usually do this for free.

You'll have much more negotiating power with the seller because they'll know you can close on the loan. In some cases (multiple offers, for example), being pre-approved might be the difference between buying and not buying your perfect home. You may also be able to save money because your in a better negotiating situation.

Choosing a lender based on the lowest rate:
Rate is important of course, but you must also consider the overall cost of the loan which is called the Annual Percentage Rate (APR). The APR is normally higher than the interest rate because it is taking into account the interest rate and all the fees associated with the loan. The  Banks, lenders and mortgage brokers all have different ways of charging similar fees. There are different strategies that a loan officer can employ to make sure the charges are based on your criteria such as time of purchase, how long do you plan to stay in the home or loan, income potential, debt ratio and credit score. A quality loan analysis should be taking in all your information into account and not just quoting you rates in the dark.

Get it in writing - Good-Faith Estimate (GFE):
Ok, so you call around and find the best deal. That's great, but unless you have that quote in writing there really isn't anything you can count on. You must ask for a Good-Faith Estimate, so you have documentation regarding your loan. Mortgage companies are notorious for changing numbers (fees) at the end of the two to four week process. It's a little hard to cancel a loan at the table when everyone is counting on you to close. Make sure you not only get the Good-Faith, but make sure you get a copy of the HUD-1 settlement statement that is prepared before close. Normally, the HUD-1 will be produced by the title company and provided to the mortgage company to show final numbers. This will be the document used at close to show all parties the transaction numbers. Request this ahead of your closing at least a day, so you can compare it to your Good-Faith Estimate. If you see major deviations in the two documents now is the time to act. You must act fast, because if you need to cancel the loan (you have a right to do so without be charged anything) you'll have to find a new lender quick and they will need to have the ability to close quick in order to save the deal for you and the seller.

Rate Lock:
Another important item is the rate lock. This is what the lending institution will use to make sure the funds for your loan will be available and at a precise interest rate for a term of time. You may hear about all these great low rates, but when you actually call it's only available for a very short term such as 5-7 days. These are obviously teaser rates and are intended to get you to the door so they can get you in for the real rate, which it always seems, is much higher! It is very important to take market conditions into account when looking at rates - today's rate might be much higher or lower than say just a couple days away. It is important to know that your loan professional is in tune with the market conditions and if necessary can lock-in now for the closing that will happen in a few weeks. Now the phase RATE LOCK might sound intimidating, but don't worry your not getting locked in or put into a position that you won't be able to cancel the loan or be obligated in some way. Remember the rate lock is for the institutions and is only a commitment on their end - not yours. Fairway Independent Mortgage Corp. is a large national company with a local branch in Grand Rapids. Get more info at: 1st Metropolitan Mortgage

Buying a home without a professional home inspection:
I have a personal friend that is in the real estate profession and when he purchased his first home he thought that he was more than capable of inspecting the home for potential problems. Lets, just say after fixing several leaks in the roof, completely gutting his living room and bathroom and fixing a frozen kitchen pipe that almost flooded his entire home - he is a believer! Being my friend and being witness to all he went through needless to say it is important to have a home inspected. There should be a contingency of a "satisfactory" home inspection included in the purchase agreement, so that if anything is wrong with the house - you and the seller can negotiate a solution. Most importantly, if there are major structural problems you have a way out of the deal! Lastly, if the seller agrees to make repairs, have your inspector verify the work prior to close. Never assume that all the work will be done just on a promise or hand shake. Dream Home Inspections LLC is a low cost professionally accredited & insured home inspection company locally owned and operated in Grand Rapids. Get more info at http://www.dreamhomeinspect.com/

Waiting to get home insurance until right before close:
You should begin your home insurance search right after you and the seller have an executed purchase agreement. Make sure to call around and have the basic info about the house ready, so they can give you a correct quote. The best thing to use is the appraisal and most appraiser won't have a problem with sending the insurance agent a copy for this purpose. You can also ask the lender to help with this request as well since it will usually be them that will have the relationship with the appraiser. Get more than one quote, you'll be surprise at the cost range. Bundling all your insurance needs such as car, home, business and/or life can get you a better rate too, so don't hesitate in asking if there are any discount programs available. Mapes Insurance has been serving Greater Grand Rapids for nearly 90 years. Get more info at http://mapesinsurance.com/mapes/index.html

Plan your move carefully:
You have your closing date for the end of month and you decide to terminate your lease the first of the following month, right? You schedule the movers or have everything packed and in your moving truck. You've done everything right on your end... Of course, Murphy's law comes and visits - your phone rings and your closing is going to be delayed until the first week of the following month! New tenants are ready to move in. Now your asking yourself - Where is the nearest hotel, storage facility and how much is this going to cost? Can we afford it?

Sure this is not suppose to happen and most of the time it doesn't. But just in case give yourself some wiggle room. Everyone wants to "not" give their landlord any more money, but buy yourself the insurance of one extra month. If you need it, you'll be much happier you did. You'll buying peace of mind and protecting yourself from expensive delays.

Making major purchases before you close:
Now that you have your pre-approval and you've found that perfect home. Isn't now a good time to start buying new furniture, electronics and/or a new car for that perfect garage? STOP! Just because your pre-approved doesn't mean that the loan is done and the process is over. You'll still be going through underwriting with the lender and part of that process means they will be reviewing your debt to income ratio's and sometimes verify your credit report to see if anything has changed. Before you make any medium to large purchases please contact your loan professional to ensure that it does not adversely effect the loan. The best thing to do is wait until you sign the final paperwork before purchasing anything.

Moving money and assets around:
Depending on the loan program you may have to document liquid assets. These are typically checking, saving, stocks, bonds, 401k or some other type of retirement funds. They will probably request two to three months statements to make sure the money didn't just conveniently appear there. If you move the funds around you'll be required to show proof with written documentation from the various entities involved. This could be a really painstaking time consuming process - leave your monies alone until your loan is closed. Your mortgage professional can advise you on how to handle any must do transfers.

Changing jobs:
Make sure to speak to your mortgage professional about any job changes that might happen during the loan process. The underwriter is going to want documentation that you have the ability to repay the loan. Obviously, your employment makes up the most important piece of your case file. Most lenders will require that you be on the new job for at least 30 days before you'll re-qualify for the loan. That is a pretty big if, so do not change jobs without consulting your mortgage professional. Less than a month with the current employer could mean the difference of homeownership or renting.

This information is provide as a general guide and for you to think about most aspects of the home purchase process. Get more info at http://www.shop4house.com/homebuyerstoolkit.htm or begin your search by clicking the buy button at the top.

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