The last thing in the world you would ever want to do is to spend a bunch of time searching for a home, finding that perfect place and then not being approved for your mortgage. There are also many common mistakes homebuyers make that could make the process much more painful than it has to be.
We’re writing this article because we know how stressful it can be to buy a house. In order to make your process easier, we are going to cover the 9 things you shouldn’t do when buying a home.
1) Don’t overestimate your budget.
Ever heard the expression “House poor“? Many homebuyers overestimate what they can actually afford and end up with very little wiggle room financially. Before jumping into buying, make sure you have a realistic idea of the yearly costs involved with owning a home.
Remember, your costs include your mortgage, property taxes, utilities, insurance and repairs. All of this before you even think about making upgrades. Factor in all the costs and leave yourself some room.
You may want to paint , buy new furniture, decorate or remodel and there are the unexpected expenses.
2) Don’t let your emotions run wild.
Buying a home is one of the biggest decisions of your life. It’s normal to be excited and fall in love with a home. However, try to keep a level head. Falling in love with a home can cloud your judgement or end in disappointment. This can happen if unforeseen issues are exposed in the inspection or if someone puts in an offer before you.
If you don’t find a home… don’t get discouraged. Home searching can be a lengthy process. It will be worth it when you find the winner.
These days, multiple offers can be an obstacle to you getting into a house you like. know how much more you want to pay for that house and don’t allow emotions to cause you to make rash decisions.
3) Don’t talk to sellers about plans for the house.
As much as you are excited to get in and put your personal touch on the home, it’s best to keep this to yourself. Sometimes home buyers meet and get to know the home owners. This is fine, but remember, for example, that the current owner will have an emotional attachment to the property.
It’s best not to make them feel like you’re going to come in and completely change the place. If you make conversation with the owners, just keep the conversation light.
Information you share should be shared only with your buyers’ agent – not the seller or the seller’s agent. The seller’s agent is working in the interest of the seller and is obligated to pass on information you share with the sellers’ agent.
4) Don’t make any large purchases.
When applying for a mortgage, every financial transaction plays a part. It is recommended that you do not make any large purchases like furniture or a car prior to applying. This is because banks want to see that you have a smooth financial history.
Sometimes buyers get excited about buying a home and they start planning. Plans on paper are fine but do implement those plans financially. The ratios used to evaluate your qualification for a loan could be compromised thus making you ineligible for the loan.
5) Don’t withdraw or deposit a lot of cash.
Going further with your financial history, cash withdraws and deposits also play a part in your mortgage approval rate. Large quantities of cash going in or out of your accounts signals a warning sign that you do not have stability. Avoid any sporadic withdraws or deposits of large sums of cash.
A large deposit could suggest a “gift” for the downpayment and that is a no no. Lenders wasn’t to know that you have the money for your downpayment and that you are not incurring another debt.
6) Don’t apply for more credit.
The amount you are approved for on your mortgage comes down to your capital. How much money do you have at your disposal? Applying for extra credit increases your debt. This extra debt decreases the amount you will be approved for on a mortgage.
Lenders use debt to income ratios to evaluate and approve loans. When those ratios are unfavorable they do not approve the loan. Just before they issue the loan, they check you credit history one more time. So don’t mess it up with more debt. You will have enough debt when you close on the mortgage.
7) Don’t co-sign a loan.
While a loan may not technically be yours – it will still equally count towards your overall debt. Co-signing a loan can have an impact on not only the amount of your mortgage, but approval rate in general. Avoid co-signing any loans until you have purchased your home.
Typically, you should avoid co-signing any loans at any time. It is critical when you are applying for a mortgage never to cosign a loan.
8) Don’t finance a car or furniture.
As financing is again a loan, it is therefore debt. Stay away from financing a car or furniture for the above mortgage approval reasons.
Your shelter is more important that your car. If the car breaks down at this crucial time , seek alternatives. Repair the car or share a ride.
9) Don’t switch or leave your job.
Financial stability is one of the most important factors considered when a bank is approving your mortgage. The key to financial stability is having a dependable income. If you switch or leave your job, often or before applying for a mortgage, this may signal red flags.
If you are thinking about a move, hang tight with your job until after your mortgage is approved. You do not want to create ripples; you want a smooth closing.
There are many important things to consider when purchasing a home. It is one of the biggest decisions of your life.
In order to ensure that you get the house you want, when you want it, you need to understand and follow those above tips. Doing so will increase your chances of finding that perfect home and getting it. Remember that financials are very important when it comes time to apply for a mortgage. Make that your priority.
Also keep in mind the emotional aspects of purchasing a home and try to stay cool. It can be a draining process, but it will be worth it when you get the keys to the castle! Trust your agent; ask your agent if you have questions. They have been involved in these processes for longer that you have been. They can provide the advice help you through the process.
Are you looking for a home in the Metro Nashville area? Give me a call. I’d love to help you find a home (and make sure you make none of the above mistakes in the process!)