7 Critical Home Buying Mistakes to Avoid
1. Have your credit checked early in the process. Most people do not know their credit scores or what really determines a good credit score. It is not enough to get a free credit report from a single credit reporting agency. It is important that you have a mortgage planner obtain a tri merge report. This will provide scores from all 3 reporting agencies. Typically the lender will take the middle of the three scores when qualifying an applicant. It’s important to determine if there are credit issues early on. Many times they can be corrected in a matter of weeks and will raise your score. A low credit score can cost you many thousands of dollars in mortgage interest.
2. Be careful not to make any new purchases on credit. As the prospect of buying your new home comes closer you will begin to think of all the new needs you’ll have. Perhaps it’s larger so you’ll need new furniture. Maybe new appliances or even how a new car will look in the driveway. Don’t laugh, if it hadn’t been done by my past clients then I wouldn’t have mentioned it. Do NOT accumulate new debt before you close on your new home. New debt lowers credit scores and throughs off the deb to income ratio that you were qualified with.
3. Know your Mortgage Planners experience and ability. It is vital to have someone with experience handling the largest purchase of your life. Sometimes people will have a friend or relative that’s in the “business”. Often this is an inexperienced person trying to earn part time income. It is important to have an experienced Mortgage Planner on your side to consult, negotiate and oversee the details of your transaction. Find out what credentials they have. Are they licensed? Do they have a certification in the particular loan programs you are interested in. How long have they worked full time in the industry? Your Mortgage Planner will be responsible for your largest purchase - make sure that you have confidence in that.
4. Do not think there are only 1 or 2 loan options available. Many buyers are unaware of the different loan options available to them. It is easy to see on the news the challenges in mortgage finance and assume that you will need 10% - 20% down payment to purchase a home. There are still excellent home loan programs available even with ZERO down payment. Speak to a qualified Mortgage Planner to review all your options.
5. Being unaware of how changes affect your credit score. It’s important to know what will affect your credit score. Often people think that what they’ve done will improve their score when in fact it drops it. For instance, never close your credit accounts prior to buying your home. Closing a credit account will cause your score to drop, at least temporarily. Be careful how many people check your credit as well. Lenders will view this as you trying to obtain new credit and lower your score also.
6. Don’t Try To Hide Your Past Financial Difficulties. One of the important services that a good Mortgage Planner offers is helping you overcome past financial difficulties that may hinder your ability to have a loan approved. Your mortgage planner should be on your side. Be careful, to explain any possible credit issue prior to moving forward with your purchase. Supply the information that helps them provide you with the best possible rate, terms and minimizes the impact these issues can present.
7. Get a Mortgage Pre-Approval. Preapproval is a necessary ingredient in negotiating the best deal possible with the seller. A seller will want to see your approval ceritficate to know that you are negotiating in good faith. It is simple to do and free. It is done over the phone and will give you a greater sense of freedom as you shop for a home.
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