New Home Owners

Buying a home is an extremely complex process. Most of us are used to seeing TV shows where people see a home they like, and then magically, they own it the next day! That is absolutely not the reality of the situation.

These are the biggest mistakes we see new homebuyers make regularly. If you are a first-time homebuyer, it is so important to have an expert on your side to guide you through the process. They will make the sale less stressful and work to ensure that your needs are met.

Not Working With the Right Agent

Having the right real estate agent on your side can make or break your home buying experience. First time home buyers usually default to using a traditional agent recommended by a friend, or to use an agent they found in a real estate office or at an open house. The problem is, these real estate agents often don’t have your best interests at heart.

Traditional real estate agents usually work with both home buyers and sellers. This puts them in a position where they cannot represent your best interest. As someone working with a seller, they are legally bound to look after the seller’s right and priorities. This includes getting the best price possible for the seller instead of getting a great deal for you. Agents who call themselves “buyer’s agents,” but also work with sellers are not fully representing you and your interests. Check out our post on finding the right agent for a full rundown on traditional real estate agents and conflicts of interest.

The best option for first-time homebuyers is to work with an exclusive buyer’s agent. These types of agents only work with home buyers, which means they have a legal obligation to you and you alone. These agents are interested in helping you find the right home for your lifestyle and your finances. They provide advice and guidance throughout the purchasing process and make sure that you are well represented during the negotiation and closing phases of your property purchase.

Not Reviewing Your Credit History

Buying a home is one of the most significant investments you are likely to make in your lifetime. You must go into the process prepared. One of the first things you should look at before you begin the process of searching for a home is your credit score. Having as high a credit score as possible can make a huge difference in what mortgage rates you are offered during a mortgage pre-approval. The lower the rate, the less you will pay overall for your home.

First, you will need to get a copy of your credit report. Mortgage lenders base their lending decisions on a FICO credit score, a number based on a formula developed by the Fair Isaac Corporation. This company also calculates the scores for the big three agencies: TransUnion, Equifax, and Experian. Your credit score ranges from 300 – 850. The higher the score, the less likely lenders are to see you as a risk.

The breakdown of your score is approximately something like this:

  • 35% – Your Payment History
  • 30% – How Much You Owe Creditors and the Amount of Credit Available to You
  • 15% – Length of Credit History
  • 10% – Number of Accounts You Have / Number of Credit Report Inquiries
  • 10% – Types of Credit You Use

Once you have your credit report, you will be able to identify any problem areas and start the process of correcting the issues. This can take up to six months, so it is a process you want to start well in advance of your home search.

After you have checked the report, you will need to learn your actual FICO score. You can purchase this from Experian for around $60, or you can get the information from your lender who will usually run the report for free as part of the pre-approval process.

Not Getting Pre-Approved for a Mortgage

Getting a mortgage pre-approval lets sellers know that you are serious about the process and have money readily available to you to move forward with a sale. This is a process that can take time, so you want to do it before you start looking for homes.

When it comes to financing a home, there are so many mortgage products out there. Between FHA (Federal Housing Administration), VA (Veterans Administration), and RHCDS (Rural Housing and Community Development Service) loans, not to mention state government-backed programs, it is difficult for a new homeowner to figure out what they qualify for without the help of a professional. The beauty of working with a great exclusive buyer’s agent is that they guide you through the process not only of finding and purchasing a home, but they can also put you in touch with trusted lenders.

A mortgage broker can look at your income and credit history and determine what mortgage program is the best fit for you. Before you meet with a broker, you need to decide what monthly payment you are comfortable with and how much home you can afford. You might need to show some restraint, as may people qualify for a larger monthly payment than they are comfortable spending. Stick to what leaves you in a good place financially instead of overextending yourself. Remember, you want to have a cushion in the event of unexpected expenses.

Once you know what you are comfortable with, it is time to get pre-approved for your mortgage. You will need to get a true mortgage pre-approval, not a pre-qualification. A pre-approval is a genuine commitment to take out a loan subject to you putting a home under contract and scheduling a home appraisal.

Not Knowing What You Want in a House

Once you have your financing in order and know how much house you can afford, it’s time to figure out what you want and need in a home. Too often, buyers skip this step, which can lead to wasted time seeing houses that don’t meet their lifestyle needs. Take the time to sit down and figure out what feature you must have to be happy with your home, including:

  • How many bedrooms?
  • How many bathrooms?
  • Where should the house be located?
  • What style home would you like?
  • What features must you have? (e.g., garage, air conditioning, yard, type of heat, pool, deck, etc.)

Remember that you should allow for some level of flexibility, as there usually is some give and take during the house-hunting process. That said, know what you are not willing to compromise on and let your agent know so that you don’t spend time looking at properties you know you won’t buy.

Not Being Prepared for the Closing

You have found the home of your dreams, you are pre-approved for a mortgage, you have put in an offer, and it has been accepted. You’re a homeowner now, right? Not so fast…you still must go through the closing.

The closing date you see on a purchase and sales contract is a target date. Do not be surprised if that date changes, as it happens all the time. Usually, it is due to a lack of follow-up on part of the process that must occur before a closing can take place. This includes:

  • Ensuring that appraisals are done on time and that the house appraises for at least the purchase price.
  • Ensuring that the lender and appraiser require no repairs.
  • Ensuring that you and the seller agree upon who will do the repairs, schedule the repairs, and cover the cost.
  • Ensuring that repairs are re-inspected.
  • Ensuring that a written mortgage commitment is issued on time and that any contingencies of the commitment are taken care of.
  • Ensuring that the seller’s lawyer has located the abstract of title, sent it for re-dating (if applicable for your area), and ordered a survey (if applicable for your area).
  • Ensuring that the closing attorney has checked with the lender to make sure closing documents will be finished in time for the closing date.

At this point, your attorney or the title company will review the title documents. If there is a problem, a letter is sent to the seller’s attorney to correct the issues. Title insurance is then ordered, and the title is delivered to your lender’s attorney. After that, the attorneys or the title company handling the closing, and the bank schedule a closing date.

Yes, this process is confusing and time-consuming, so you should be prepared ahead of time for a little stress. But don’t worry, especially if you have done your research and have a great buyer’s agent on your side. An experienced agent will know and understand this process and make sure that things go as smoothly as possible. When you research your agent, ask up front if they manage the closing process so that you aren’t responsible for monitoring the process yourself.

Ready to get started on your home search? Click the image to your left to take our new client questionnaire – it’s the first step to finding the right home and exclusive buyer’s agent for you!

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