Kevin Durkin's Blog
As incredible the act of purchasing a home is, many buyers end up regretting their purchase. There’s a variety of reasons for this. It all comes down to being ill-informed about buying a home and the type of home needed for the most liable situation. Read on to find out some of the biggest regrets home buyers face and how to avoid them.
Buying Too Small Of A Home
The most prominent regret that many buyers face is not buying a larger property. Many people want to live in a specific location or type of home that they overlook the size altogether. One reason that people end up buying a home that’s the wrong size is that they rush to find a property in a particular area. If you branch out on your search, you’ll have a better shot at finding the right size home. The area might not matter as much as the space you’re living in, s keep that in mind.
Not Doing Your Research
People tend to skip out on the research phase of buying a home. It’s critical that buyers understand things like mortgage rates, fees, credit reports, how much needs to be saved, and more. There are so many things that go into buying a home that you could easily miss out on something if you don’t know what you’re in for ahead of time.
Not Saving Enough
Your home will be one of the largest purchases you make in your entire life. There is a lot more to the cost than just the monthly mortgage payment. You’ll need a lot of money upfront when you buy a home including a downpayment along with other closing costs and fees. Plus, you’ll need to set some money aside for any repairs or replacements you need to do in the home once you move in. It’s also a good idea to have an emergency fund available just in case. Life happens, and you don’t want your savings to be depleted because you bought a house.
Keep in mind that the bigger of a downpayment you make, the better off you’ll be. Even if you can buy a home with a low downpayment, you want to put down as much as possible. A higher downpayment will keep your mortgage payments lower, get you a better rate, and you may even be able to avoid paying for PMI (private mortgage insurance.) Aim to save a 20 percent down payment for the most optimal mortgage situation.
While buying a home is a huge decision that should entail a lot of planning and preparation, applying for a mortgage can be surprisingly easy. Just like with other lenders and creditors, a mortgage lender will want to know that letting you borrow money will be a safe investment. Applying for a mortgage is all about ensuring just that.
In today’s post, we’re going to breakdown the home loan application process to help you have the best chances at a smooth and successful mortgage approval. We’ll also define some of the common terms used in mortgages that might leave you scratching your head so you have a better idea of what your options are.
Prequalification and Preapproval
Getting prequalified and preapproved for a mortgaged can both be helpful steps toward securing your home loan. The two terms mean two entirely different things, however.
In order to be prequalified for a mortgage, you typically need to only fill out a simple form (sometimes directly through a lender’s website). On this form, you won’t need to provide specifics or official documents.
Why is this process so simple? Well, that’s because getting prequalified for a loan doesn’t ensure that you’ll actually receive one. Rather, it is simply the first step toward finding out what type of mortgage and interest rates you could receive.
The next step after prequalification is preapproval. To get preapproved, you’ll have to fill out an official mortgage application. Your lender of choice will request a few pieces of information from you, including tax returns, proof of employment for the last two years, and a list of your debts. The lender will also perform a credit check to determine your loan eligibility.
At this phase, lenders will also run your credit report. This is a type of “hard credit inquiry” that details your payment history, the number of accounts you have open, and other factors that help make up your credit score.
To secure the lowest interest rate possible, it helps to have a high credit score. So, in the years and months leading up to your mortgage application, focusing on building credit will pay off.
To increase your credit score, you’ll need to focus on paying your bills on time each month. You should also avoid opening new accounts within a few months of applying for a mortgage because this will count as a new credit inquiry. New credit inquiries--including applying for a mortgage--lower your score temporarily, so it’s best to avoid them when possible.
Additional paperwork required for mortgage applications
Not every mortgage application will be the same. Depending on the type of income you receive, you may need to provide different forms of income verification.
Each person will also have to claim different debts and assets. When buying a home with a spouse or partner, it’s important to consider your debts, assets, and credit scores to determine if it’s better to apply jointly or separately.
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First-time homebuyers are prone to making a lot of mistakes when it comes to picking a home, due to many reasons—one of which is just plain old inexperience. If you plan to buy your first home soon, these are a few things you want to avoid.
- Not having a budget. It might surprise you to know but a lot of first time home buyers don’t have a spending budget before they start looking. Or sometimes, they look at houses that are way over what they can afford and end up spelling more money than they ought to. It's always better to clearly define what you are willing to spend on the new house and stick with it. That way you have a more comprehensive search scope that you can share with your realtor.
- Being overly emotional. Sometimes you see a house that looks like the builder intentionally had you in mind. But sometimes it's better to put your emotions in check because it might reduce your bargaining power with the seller. Being too excited might even make you oblivious to specific reasons why the home may not be a good fit for you.
- Not factoring additional costs of renovations and home improvements. Having a budget and firmly sticking to it is not enough, you also have to take into consideration the costs of any home additions or repair work you think of doing. You want to change the lamp fixtures or faucets in the showers? Be prepared to spend a little more.
- Underestimating the costs of maintaining the home. Sure, you get to buy the house at a giveaway price but have you stopped to consider what it will cost you to keep the house in that condition? Lots of first time home buyers don't do this. Electricity bill, gas bill cable bills, and even homeowner association fees are things that any home buyer should consider before concluding on any deal.
- Not hiring an agent. Winging it on your own is probably the most common mistake first-time buyers make. In a bid to save some money, they neglect to hire an agent of their own and choose to work directly with the seller or even worse, the seller’s agent themselves. More likely than not, what’s going to happen is a novice buyer who finds himself outclassed by an experienced salesperson.
Whatever you do, avoid these mistakes by contacting a real estate professional in your area.