MIAMI – June 27, 2012 – Common pitfalls trip up some homebuyers when purchasing a home. Make sure clients don’t fall for one. Credit.com recently featured some of the biggest mistakes:
1. Trying to fix credit scores before buying a home. Homebuyers can do more harm than good if they don’t consult a financial expert first. “Even paying down credit card balances – which is a good thing as far as your credit scores and debt ratios are concerned – could be a problem if it leaves you short the cash you need to qualify to get the loan,” says Gerri Detweiler, Credit.com’s personal finance expert.
2. Not considering the future enough in their selection. Buyers should consider what they want out of a house five or 10 years down the road. Do they plan to expand their family? If so, they may need a bigger home and want a different location. Also, how long do they plan on staying at the home? That can help determine the most sensible mortgage.
3. Failing to research financing enough. First comes the home and then the financing? Not in today’s market. Home shoppers should get prequalified for a mortgage before they start shopping so they know what they can afford. “The time to make decisions about your mortgage needs is not during this 10-day window” after you sign a contract, says Keith Gumbinger, vice president of HSH.com. “At most, this is time to shop for rates and fees and such. He says a credit evaluation, selection of mortgage type and a preferred lender should be completed “well in advance of even wandering through the market looking at houses.”
4. Assuming that the Good Faith Estimate is the amount paid at closing. The form lenders provide that estimates closing costs is not set in stone. Closing costs may actually be more, so buyers need to be prepared. Closing costs generally are about 3 percent to 5 percent of the loan amount. “Shop around and compare the Good Faith Estimate provided by the lender with that of two or three other lenders,” suggests Ryan Himmel, a CPA and founder of BIDaWIZ, a tax advice resource. “If there is a significant disparity in estimates, then request an explanation from the lender to determine if you would like to move forward.”
5. Failing to budget for home expenses. Budgeting to purchase a home isn’t enough. Prospective homeowners would be wise to not forget to budget for maintaining the home too. New homeowners should budget for an increase in utility bills as well as for future maintenance and repair costs, such as repairing a furnace or roof.
Source: “10 Mistakes New Homebuyers Make,” Credit.com (2012)
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