Posted on: 15th Sep, 2005 11:55 pm
If you are preparing to buy a home of your own, then check out these top 12 home-buying mistakes that most people make. Being aware of these mistakes will prevent you from falling into the traps others have.
While everyone makes some mistakes when buying a home, some of the most common mistakes can be avoided if you are prepared. One of the worst mistakes you can make is to choose the wrong mortgage. But if you know what to not do when looking for a home loan, you'll be able to enjoy your home for years to come.
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1. Not being aware of mortgage options
There is a general perception that only those with moderate or high income will be approved for a mortgage. Those with a low income or poor credit avoid going for mortgages because they feel that either they won't qualify, or won't be able to pay the fees and interest associated with them.
However, there are plenty of programs with special features available for borrowers with different income levels. What programs are available depend on the state of the economy and the housing market. What buyers need is a little knowledge of mortgages and their pros and cons to purchase their dream house with the best program available.
However, there are plenty of programs with special features available for borrowers with different income levels. What programs are available depend on the state of the economy and the housing market. What buyers need is a little knowledge of mortgages and their pros and cons to purchase their dream house with the best program available.
2. Find a home without pre-qualification or pre-approval
The first thing anyone aspiring to homeownership should do is get prequalified/preapproved for a mortgage. This will help you learn how much you can afford before you go shopping for your dream home. Make sure that when you get prequalified/preapproved for a certain loan amount, you get a letter from the lender specifying how much you are approved for as this will speed up the home buying process.
3. Not shopping around for the best lender
Borrowers usually try to get loans from the lender who offers the lowest interest rate but ignore the other costs like the APR, loan processing fee, and other closing costs. The lender's reputation and the services they offer are also worth considering.
4. Buying a home without a home inspection
A home inspection is one of the most important steps when buying a home. Home inspection helps you find out how much damage has been done to the property and how much it will cost to repair. If the inspection report estimates that the repairs are more than you can afford, you may be able to get out of the contract without losing your earnest money. Most lenders, including those offering FHA loans, require a home inspection before they'll give final approval to your loan.
5. Making verbal statements
Lenders and real estate agents often make oral promises they can't guarantee will be part of the contract for a deed. You need to make sure that any promises are guaranteed in writing and conform with your state's law before you sign the contracts.
6. Signing documents without checking
Because brokers are paid by the number of people they sell loans too, they rarely give their customers the opportunity to read the loan agreements at closing. Therefore, you should ask your broker to send you copies of the agreement before closing so you can read them before signing.
7. Not getting a Good Faith Estimate
Before signing the mortgage agreement, you should understand what fees are associated with getting the loan, such as the document preparation fees, the public notary fees, etc. So before you sign the mortgage, get a Good Faith Estimate (GFE) from the lender. The lender should be able to provide you with a GFE within 3-7 business days of applying for the loan.
8. The rate-lock is not made in writing
If you are getting a mortgage, you should get a rate-lock agreement from your lender that will specify the interest rate, how long the rate lock will last, and any other details you desire. This is especially important if you are agreeing to an adjustable rate mortgage (ARM).
9. Locking in at a low interest rate
The majority of buyers wait for market rates to dip before going for a mortgage. But, it's hard to predict how long a certain interest rate will last before the market conditions allow lenders to raise them again. Therefore, the moment you find an interest rate you can afford you should lock into it.
10. Use an agent who represents both buyer and seller
Only a few agents represent both buyers and sellers. Most agents specialize in representing one party. One of the worst mistakes you can make is to hire an agent who represents both. You need to have an agent who will solely represent your interests.
11. Terminating the lease on the date of closing
If you are renting a home, you need to make sure the lease terminates after you move into your new home. Even though this may mean that you may be paying a mortgage and rent in the same month, it will protect you if there are delays in closing or moving.
12. Shopping for home insurance just before closing
Few sellers will accept an offer if you don't have funding ready. If you are unable to get a loan, you may lose your earnest money and the house of your dreams. Therefore, the best time to start shopping for a loan is the minute you decide you want to buy a home.
While everyone makes some mistakes when buying a home, some of the most common mistakes can be avoided if you are prepared. One of the worst mistakes you can make is to choose the wrong mortgage. But if you know what to not do when looking for a home loan, you'll be able to enjoy your home for years to come.
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I paid 1000 in escrow fees and the underwriters denied the application because of electircal towers, this was no fault of mine. Now, they will not return my money. WHAT CAN BE DONE. THANK YOU
What is the purpose of being prequalified when the underwriters make the determining decision whether or not you can purchase a home
There are a few levels of qualification. The preapproval process is usually based on the information you verbally provide. The UW then checks what you have said with what you document. If you want to be 100% sure get your loan underwritten before going in. They can still deny it based on the property but you will know that it isnt because you dont qualify.
Brian
Brian
we were in process of refinancing. everything great, income, credit report, appraisal, low fixed for 15 years gfe, then the mortgage company asked for a survey. one was done and we find the city has an easement on two sides of our home and one includes part! of our home. these were in place when we bought the home, but no one told us, although they may not have known either. it didn't show up in the title search. the mortgage company backed out of the refinance. now we're looking at at least 2 points or higher and possibly an adjustable. and also will have a problem either rebuilding here or selling in the future. what should we do?
Hi Pearl,
Welcome to the forums.
You mean you are looking for a 2% higher rate compared to your current interest rate? Oh no, you'll be paying more. Why do you want to refinance? aren't you ok with the payments? if the current lender is offering the refinance loan, he should have detected it through the earlier survey.
It's not your fault I guess because it didn't show up on the title search. I think you should show the title search report to the lender with whom you're looking for a loan. May be then they'll be convinced that it's not intentional. However, I guess you'll have to remove the easement. Consult your lender or attorney on how to do it.
Take Care
Welcome to the forums.
You mean you are looking for a 2% higher rate compared to your current interest rate? Oh no, you'll be paying more. Why do you want to refinance? aren't you ok with the payments? if the current lender is offering the refinance loan, he should have detected it through the earlier survey.
It's not your fault I guess because it didn't show up on the title search. I think you should show the title search report to the lender with whom you're looking for a loan. May be then they'll be convinced that it's not intentional. However, I guess you'll have to remove the easement. Consult your lender or attorney on how to do it.
Take Care
Hello Pearl,
I agree with Sara. You need to contact your lender and your attorney. In the state of Texas, we are seeing more issues with surveys. Here is the problem, when you buy the house you are assuming that everything is ok with the previous survey. This may not be the case. In some instances the previous owner has made changes, or the city has and this can cause the survey to be out of date. When you refinance or try to sell your home, it shows up due to the lender requesting a survey. They may have accepted the old survey and are not requesting a new one. I am not sure why. Please contact your lender to find out if they have a copy of the prior survey. You can also contact your prior title company. It is always best practice to order a new survey when purchasing homes. It does increase closing costs, but it can help protect you in the future. Please let us know what you find out regarding the issue. If you have any additional questions or need further assistance, let us know. I wish you the best in solving your issue.
I agree with Sara. You need to contact your lender and your attorney. In the state of Texas, we are seeing more issues with surveys. Here is the problem, when you buy the house you are assuming that everything is ok with the previous survey. This may not be the case. In some instances the previous owner has made changes, or the city has and this can cause the survey to be out of date. When you refinance or try to sell your home, it shows up due to the lender requesting a survey. They may have accepted the old survey and are not requesting a new one. I am not sure why. Please contact your lender to find out if they have a copy of the prior survey. You can also contact your prior title company. It is always best practice to order a new survey when purchasing homes. It does increase closing costs, but it can help protect you in the future. Please let us know what you find out regarding the issue. If you have any additional questions or need further assistance, let us know. I wish you the best in solving your issue.
Hi Sara and Stephanie,
No, we had a three year loan to rehab the house, then our lender was going to have us refinance to go to a 15 year. They don't service 15 or 30 year loans at their bank. They sell them to the secondary market. Our GFE was for a 15 yr. at 5.8. The deal was almost done. Then the mortgage company requested a survey, which was not done when we originally purchased the home. The survey shows the city has 1/2 of our home (2500 sq. ft cut in half) and pretty much our entire yard. We are contacting an attorney. What baffles my husband and I is this easement was there before and appears to be public knowledge. The surveyor just went to the city and found out about it. How was this house sold at all in the past? The home is old and has been here longer than the easement. Wouldn't the city have just bought the property from the owner instead of taking 1/2 the house? Especially since now we've surveyed, the home can't be mortgaged or rebuilt if something happened? And why wouldn't they have known their revision would encompass the house? Didn't they survey to make the easement change?
No, we had a three year loan to rehab the house, then our lender was going to have us refinance to go to a 15 year. They don't service 15 or 30 year loans at their bank. They sell them to the secondary market. Our GFE was for a 15 yr. at 5.8. The deal was almost done. Then the mortgage company requested a survey, which was not done when we originally purchased the home. The survey shows the city has 1/2 of our home (2500 sq. ft cut in half) and pretty much our entire yard. We are contacting an attorney. What baffles my husband and I is this easement was there before and appears to be public knowledge. The surveyor just went to the city and found out about it. How was this house sold at all in the past? The home is old and has been here longer than the easement. Wouldn't the city have just bought the property from the owner instead of taking 1/2 the house? Especially since now we've surveyed, the home can't be mortgaged or rebuilt if something happened? And why wouldn't they have known their revision would encompass the house? Didn't they survey to make the easement change?
Hi Stephanie,
Nice to see you again :)
I think you're right in saying that the poster needs to do another survey of his property. Even though the lender may not need another survey, one should have it done again in order to avoid any property issues later on. Therefore, I suggest that Pearl should try to remove the easements from the property and then try for a refinance.
Good luck
Nice to see you again :)
I think you're right in saying that the poster needs to do another survey of his property. Even though the lender may not need another survey, one should have it done again in order to avoid any property issues later on. Therefore, I suggest that Pearl should try to remove the easements from the property and then try for a refinance.
Good luck
Nice to see you to Carol!
I am glad you are contacting your attorney on this issue Pearl. What state are you in?
It sounds as if you are going through a broker or a banker to do your loan. They both sell on the secondary market, however the guidelines used represents the banks that they sell loans to. This should not affect your need of a survey unless you are in a survey state. However, since it has come up, I wonder how you managed to purchase the house in the beginning without a survey if you are in a survey state. I only know of two states that require surveys. There may be more.
As you stated, the problem with your property was public knowledge. Therefore, it should have been presented to you when you completed your rehab mortgage. Please let us know what the attorney says.
I hope you had a happy 4th!
I am glad you are contacting your attorney on this issue Pearl. What state are you in?
It sounds as if you are going through a broker or a banker to do your loan. They both sell on the secondary market, however the guidelines used represents the banks that they sell loans to. This should not affect your need of a survey unless you are in a survey state. However, since it has come up, I wonder how you managed to purchase the house in the beginning without a survey if you are in a survey state. I only know of two states that require surveys. There may be more.
As you stated, the problem with your property was public knowledge. Therefore, it should have been presented to you when you completed your rehab mortgage. Please let us know what the attorney says.
I hope you had a happy 4th!
I have never heard of a mortgage company needing a survey of your property, normally they just do an appraisal and be done with it. Am I missing something here?
Hi jbarto!
Some states require a survey, Texas is one of them. I think Florida is another, but I am not exact on that since it has been a while since I have done loans in Florida.
In Texas, a survey is required on all loans. This definately has caused major issues in Dallas and the surrounding areas since there is so much growth and from people making changes on the property without disclosing those changes up front so that the buyer will know that they need a new survey before closing on their home. Unfortunately, it is towards the end of the loan process that these problems arise.
Have a great one jbarto!
Some states require a survey, Texas is one of them. I think Florida is another, but I am not exact on that since it has been a while since I have done loans in Florida.
In Texas, a survey is required on all loans. This definately has caused major issues in Dallas and the surrounding areas since there is so much growth and from people making changes on the property without disclosing those changes up front so that the buyer will know that they need a new survey before closing on their home. Unfortunately, it is towards the end of the loan process that these problems arise.
Have a great one jbarto!
Hi Stephanie,
We've have been looking for an attorney but have yet to find one that doesn't work for the title company or doesn't do business with the title company. The only one who would take our case wanted us to sign a waiver not to involve the title company. And we live in Kansas.
We've have been looking for an attorney but have yet to find one that doesn't work for the title company or doesn't do business with the title company. The only one who would take our case wanted us to sign a waiver not to involve the title company. And we live in Kansas.
Hi pearl,
If you're in the state of Kansas, i suggest that you check out the Yellow Pages to find out a real estate attorney to help you with property issues.
Thanks.
If you're in the state of Kansas, i suggest that you check out the Yellow Pages to find out a real estate attorney to help you with property issues.
Thanks.
You would think the appraiser would have caught it, not to mention the title company as well.
Have you contacted the title insurer as well as your lender to let them know you have a problem?
"http://www.ksrods.org/RODmap.htm"
You might want to contact the registar of deeds and ask for a step in the right direction.
[Link deactivated as per forum ruls. Thanks.]
Have you contacted the title insurer as well as your lender to let them know you have a problem?
"http://www.ksrods.org/RODmap.htm"
You might want to contact the registar of deeds and ask for a step in the right direction.
[Link deactivated as per forum ruls. Thanks.]
How fast can a loan be approved and go to closing in the state of Texas?
Must the seller provide a copy of CC&R's to buyer (to review) before closing and be included the loan paper at closing?
Must the seller provide a copy of CC&R's to buyer (to review) before closing and be included the loan paper at closing?