By Richard Bleuze
The author has permitted the reprinting and redistribution of this article.
If you are like most people, buying a home is the biggest investment you will ever make in your lifetime. Annual mortgage, taxes and insurance costs can eat up to 25% to 40% of your gross annual income.
Buying a home Looking for a home without being pre-approved, is in my opinion a major no-no.
During the pre-approval process, the mortgage company does virtually all the work associated with obtaining full-approval. Since there is no property yet identified to purchase, however, an appraisal and title search aren’t conducted.
When you’re pre-approved, you have better able to negotiate with the seller. The seller knows you can close the transaction because a lender has carefully reviewed your income, assets, credit and other relevant information. In some cases (multiple offers, for example), being pre-approved can make the difference between buying and not buying a home. Also, you can save thousands of dollars as a result of being in a better negotiating situation.
Making verbal (oral) agreements!
If an agent tries to make you sign a written document that is contrary to their verbal commitments, don’t do it! In fact, written contracts almost always override verbal contracts. When buying or selling real estate, abide by this maxim Get it in writing!
Choosing a lender because they have the lowest rate.
While rate is important, you have to consider the overall cost of your loan. Pay close attention to the APR, loan fees, discount and origination points. Some lenders include discount and origination points in their quoted points. Other lenders may only quote discount points, when in fact there is an additional origination point (or fraction of a point).
Always request a written good-faith estimate. Within 3 working days after receipt of your completed loan application, your mortgage company is required to provide you with a written good-faith estimate of closing costs.
The cost of the mortgage, however, shouldn’t be your only criteria. There is no substitute for asking family and friends for referrals and for interviewing prospective mortgage companies. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise.
Choosing a lender because they are recommended by your real estate agent. Remember, that your real estate agent is not a financial expert. He or she may not know which loan is best for you. Your real estate agent gets a commission only when your transaction closes. Thus, your real estate agent may refer you to a lender who will close your loan, but who may not have the best rates or fees. Also, many real estate agents refer you to one of their friends in the loan business–who also may not have the best rates or fees.
Although most real estate agents are professional and concerned about your best interests, you should do your own homework.
I recommend shopping for a loan with at least three mortgage companies before you make a decision. There are countless stories of consumers who ended up paying higher rates, or got a loan that wasn’t right for them, because they blindly followed their real estate agent’s advice.
Not getting a rate lock in writing. Also, remember that when a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and other particulars about the program.
Using a dual agent (an agent who represents the buyer and seller in the same transaction). In most situations, dual agents cannot be fair to both buyer and seller. Since the seller usually pays the commission, the dual agent may negotiate harder for the seller than for the buyer. If you are a buyer, it is usually better to have your own agent represent you. The only time you should consider using a dual agent, is when you can get a price break (usually resulting from the dual agent lowering their commission).
Buying a home without professional inspections.
Unless you’re buying a new home with warranties on most equipment, I highly recommended that you get property, roof and termite inspections. These reports will give you a better picture of what you’re buying. Inspection reports are great negotiating tools when it comes to asking the seller to make repairs. If a professional home inspector states that certain repairs need to be made, the seller is more likely to agree to making them.
Not shopping for home insurance until you are ready to close.
Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance. Do not do this! You might find that you have no time left to shop around for the best rate.
Signing documents without reading them.
Do not sign documents in a hurry. I know, most escrow people or agents want you to sign the as soon as possible. I recommend that you review the documents you will be signing at close of escrow–including a copy of all loan documents. Do not expect to read all the documents during the closing. There is rarely enough time to do that. And, afterall, you are investing your money!
Making moving plans that don’t work.
Ask the movers to show up five to seven days after you anticipate closing your transaction. Escrows never seem to close on time. Even on the day of closing. You are buying peace of mind–and protecting yourself from expensive delays.
Richard sells real estate in the San Gabriel Valley which is about 12 miles South of Los Angeles. For more information, visit his website at httpwww.westsangabrielvalleyrealestate.com
If you would like to take advantage of the market and learn how to invest in real estate and you are local to the Dallas Fort Worth area, I know a really great teacher and mentor here in Arlington Texas. Please take a look at his web site: DennisJHenson.com, Dennis has a great Mentoring and training program, I know because I am one of his former students. I learned a lot from his one on one teaching technique. – Michael Harman 817-457-7572 email@example.com>