When you are ready to buy a home, you have to be careful about everything from your credit history to the money you keep in the bank. Small mistakes could lead to a loan denial or a high interest rate. Here are some of the mistakes homebuyers make during the loan process and how you can avoid them.
Opting for Pre-Qualification Over Pre-Approval
Some homebuyers believe that a pre-qualification and a pre-approval are the same thing. They are not. A pre-qualification is a casual glimpse into your financial history that lenders use to determine how much of a home loan you might be able to afford. A pre-approval is more concrete. The assessment by lenders is in-depth and gives you a solid idea of whether or not you will be approved for a home.
A pre-qualification is useful is you just want a general understanding of what you can afford. However, the pre-approval has more power with buyers. They know you are serious about buying a home when you can provide a letter that almost guarantees you can pay for the home.
Accepting Verbal Agreements
Regardless of how trustworthy the seller of a home is, it is imperative that you get every agreement in writing. When you have the agreement in writing, you have a legal document that could be useful to you if there is a conflict down the road in the home buying process.
A verbal agreement puts into writing the terms of an arrangement that is reached. For instance, if the seller agrees to fix the roof before closing, you can refer to the written agreement if he or she does not fulfill this promise. The agreement should outline the consequences for failing to follow the terms.
Failing to Fully Consider the Cost of Homeownership
Many homebuyers are so focused on the mortgage for their dream homes, that they forget the other costs that come with homeownership. The additional expenses that come with it could have a significant impact on your annual budget. Therefore, it is important that you factor in those possible expenses before committing to a purchase.
If this is your first-time owning a home and do not know what expenses you could face, work with your real estate agent. He or she can help you determine how much you need to set aside on a yearly basis to cover expenses throughout the year so that you are prepared for any and all situations.