Buying a home is an exciting process requiring lots of decisions. What common mistakes do people make, and how can you avoid them? Here is a list of things to avoid.
- Glossing over pre-approval. Don’t mistake “pre-approved” for “pre-qualified.” They are not the same. Pre-qualified means the lender might approve a mortgage range, based on a cursory overview of your income, debt, and other assets. Pre-approval goes one significant step further, saying the lender has completed the underwriting process. Having a pre-approval letter from your lender affords you a stronger position, especially in a competitive market when buying a home.
- Missing mortgage opportunities. Shop around for the best rate with the best terms. Educate yourself on the terms, interest rates, fees, and details of each loan offer. Don’t be afraid to interview lenders, and make sure you use a lender with experience in the loan program you select.
- Draining savings for a down payment. Doing so could prove problematic if your new home needs repairs or replacement of costly items such as the HVAC unit.
- Failing to check your credit report. Knowing your credit score before applying for a mortgage gives you time to improve it, if necessary. Taking a few months to pay bills on time and reduce credit card balances will have a positive impact on your score, meaning a lower interest rate when you buy.
- Skipping appraisals and inspections. You might save a little money upfront, but skipping important inspections might be more expensive down the road. Inspections can reveal problems that need to be addressed, and sometimes you can negotiate with the seller to either pay for repairs or lower the sales price.