It doesn’t seem to matter how careful you are, when purchasing a new home, some deal killers are unavoidable. Others, however, are preventable, so pay pay attention if you hope to keep your deal alive! Here are a few things to remember:
1. Your Mortgage Pre-approval
A very common reason that a real estate deal falls apart is that many homebuyers don’t understand the mortgage process. You may get a home loan pre-approval, but that does not guarantee that you will get the loan.
After you get your pre-approval letter from your mortgage broker, and being to move forward with the purchase, the lender starts your file, gives you a list of paperwork, orders an appraisal and credit reports and verifies your employment and income, and more.
Your file is sent to a loan processor who reviews all your information as well as the appraisal. Then he puts together a package of all pertinent information to be sent to the underwriter.
The underwriter is the person who ultimately decides whether or not you are an acceptable credit risk for the bank. He will assess your ability to repay the loan, your credit, and the collateral that you use to secure the mortgage – in a mortgage, the collateral is the home. Then, just before they fund the loan, the underwriter performs what is known as a “soft pull” of your credit information to see if anything has changed.
This is the point where many borrowers tend to mess up. You must be careful not, to do anything – from application to closing – that might change your financial situation and sabotage your final loan approval. This means that you cannot go shopping on credit for appliances, furniture or anything other large dollar amount purchase. Don’t switch jobs, fall behind on your bills, co-sign a loan for anyone, or in any way reduce the income stated on your application.
2. Read Homeowners Docs Carefully
If you are buying a home in a managed community governed by a homeowners association (HOA), you’ll be given a quite a bit of paperwork to read and approve. Because there could be deal killers included in the fine print, it’s very important to get start reading right away upon receipt of the documents. Be sure to look for information about liens against the property; litigation against the HOA, the builder, and any red flags in the HOA budget. Since these documents aren’t easy to understand, its a good idea to have your attorney look them over and advise you of any potential deal killers lurking within.
3. Home Inspection Issues
All homes (even new construction) could have underlying issues. Going into the process not fully understanding this can set you up for a failed real estate deal. Ideally you want to find a home that was owned by perfect people who always took care of everything during the entire time they lived there, but those are few and far between.
Set your sites on finding a home that has small, easy-to-fix problems, and don’t freak out if some are worse than others. In other words, when considering making an offer, laugh at the loose doorknob but negotiate when it comes to water damage or worse.
If you are a “nit-picky” buyer, who plans on nickel and diming the current owners into replacing every little thing like missing switch plates and dripping faucets, that could become a deal-breaker. Of course, in a buyer’s market you might get away with minor demands. In a seller’s market, however, there is always a cleaner offer right behind yours.
4. Major Budget Blunders
The real estate industry does a great job of reminding homebuyers that they’ll need a down payment – usually from 3 percent to 20 percent of the loan amount when they purchase a home. Unfortunately, they often fail to inform consumers about are the loan’s closing costs. This is most likely because closing costs are a little harder to pin down. They vary wildly and depend on the type of loan, the amount of the down payment, and a host of other factors. Unfortunately, this lack of information may cause real estate deals to fall apart due to a lack of funds. To avoid this problem, pay close attention to all communications from your lender.
First, you should get a form called a Loan Estimate. Look this over carefully to make sure that everything you and your lender agreed to is included. Pay close attention to the “Calculating Cash to Close” section, which concludes with an estimated cost to close the loan. Remember, this is an estimate and the amount may go higher or lower in the end. Talk with your lender if you find any problems in this form, especially if it will be impossible for you to come up with this money.
Just prior to closing you will receive the “Closing Disclosure,” which is similar to the estimate, but these figures are final. Again, review the “Cash to Close” figure.
When working with professionals, and paying attention to details, real estate deals conclude successfully. Most often, it all comes down to the experience of your Realtor. Choose wisely and you’ll avoid the common pitfalls that can derail transactions. For a smooth, low-stress real estate transaction, slow down, keep your expectations realistic and heed the advice of your real estate agent or attorney
