Today I was browsing through the world wide web and came across an article l found intriguing. It was mentioning the six most common mistakes home buyers make when thinking about and purchasing a home. Some made sense to me and others were a little shocking for me. They are:
First, knowing your credit score. Unfortunately, I had to agree with this misconception when it comes to buying a home. Home buyers need to know what their credit score is before they go out and shop for a mortgage. You are entitled each and every year for a free credit report from the three major bureaus. Get those copies and check to make sure the information is correct on them. If not, get it fixed. Then make sure that your revolving credit balance is at 30% or less. that will increase your score dramatically. In addition it will increase your buying power for a mortgage since debt to income ratio is the factor in the amount of money you can borrow. If you do not think it is important; consider that on a $200,000 home and increase in rate of only .4% increases your payment by $62.00 a month for a 30 year fixed rate mortgage.
Second, buying a car before a house. As I mentioned in the first point debt to income ratio is the sole factor in the amount of money you can borrow for a mortgage. So, if you go out and purchase a car that monthly payment will affect the total amount you can borrow. It also brings up a red flag if it is opened recently as it will lower your credit score for about 90 days and then slowly raise it again. But a $300.00 car payment affects the amount you can borrow by as much as $20,000. So that car payment could keep you from owning the home of your dreams.
Third, skimping on the home inspection. To many times home buyers are draining their bank accounts to buy that house. Without a thorough and good home inspection to inform them of the issues in the hosue they could start to see unexpected repair bills come up that they do not have budgeted to fix and cannot afford to have done. You need to know up front what, if anything is wrong with the home and negotiate what you can to get repaired on the home before you move in.
Fourth, no lawyer. Now in North Carolina we close with an attorney on our Real Estate transactions. But there are states that do not. In those states you may want to ensure your interests are protected by hiring an attorney. The belief is the agents and the mortgage broker want the deal to close no matter what because they do not get paid if it does not close. The attorney gets their money no matter what and they are more likely to protect your interests.
Fifth, no contingencies. Usually when you put an offer on a home the seller will ask for an earnest deposit. They will want from 1% to 3% of the sale price as an earnest deposit. If you back out of the deal and their are no contingencies to protect your interests you would lose your earnest deposit. if you have a reputable Realtor who is working for you and your best interests this should never happen. I take great pride in informing my clients of everything and protecting their investment against un foreseen instances.
Sixth, no budgeting for insurance. A lot of people mis calculate the cost of home owner insurance. The costs can be high if you are located in a flood zone, or a hurricane area. So, you should do your homework before you go out and look and make sure you have an idea of what the home owners insurance is going to be. Unfortunately, I see it all to often that they have not even considered the cost fo that when they are figuring out how much of a home they can afford.
These are the most common mistakes CNN money found in a study that home buyers make when purchasing a home. so please do your home work in advance and make sure you are represented by a realtor who is sincerely looking out for your best interests.
Dave diCecco
Realtor/Broker
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