What not to do... (when buying a home)
We all have temptations.... but one surefire way to cause gray hairs and stroke in your real estate agent and even potentially lose the purchase of your new dream home, is to commit one of these "crimes"....
In no particular order, here are my top five NO NOs.
1. Location, Location, Location
The best analogy to house hunting I read was that buying a home is like dating. It's very easy to let yourself fall in love... then you meet their mother (aka the "Monster in Law".... great film!) With a house, it could be the perfect home, but the worst neighborhood/location etc...
Your agent will be able provide you with statistics on the neighborhood, but due to discrimination laws, they cannot alert you or persuade you on things that might unduly influence your decision.... maybe its the hillbillies down the road that shoot cans off the fence every night at 3 am, or the weekly drug busts across the street, or the neighborhood garage band that seems to only play just as you drift off to sleep and only on the week nights...
I recommend to my clients to drive by the house in the day time and the night time, measure their commute to work, talk to the neighbors if possible. Make sure that everything about this "dream guy/or gal" is what you are looking for--you are going to have to live with it!
2. Would you like to save 20% on this purchase by applying for our store card?
For some bizarre reason, the moment you start shopping for a home, you have this crazy desire to get a new credit card. DON'T! That can delay your home buying process by months... several months....
We've all been there in the Old Navy line, and the bubbly cashier asks if you want to save X percent by getting a store card... No! That new credit card = they will run your credit = lowers your score. And, if you get approved, your lender will be able to see that new credit with a new debt limit, which drops that score and typically has a negative impact on the terms of your loan.
I've also seen clients have a deal completely fall apart and lose their dream home because they decided that their new home deserved new appliances or new furniture. So they hop down to their local furniture store, buy the new furniture on credit and have the delivery scheduled in the days that follow as they are closing in a day or two.. You cannot imagine the heartache and tears that come from all parties involved when you have to tell them they now have gorgeous furniture and NO HOME to put it in. No means No y'all!
As a side note, same goes for running up the credit balances while in escrow. Little Susie doesn't need those crazy elaborate gifts for her birthday, and you don't need to plan a family vacation to Disney World in the middle of escrow! I know escrow is a 21-45 day process from picking out the home, submitting your offer, acceptance, then all the steps to getting the keys and actually closing, but you have to resist the temptation to spend!
3. Zoom, Zoom.
Really, dude? Really?! This isn't the HGTV dream home giveaway. I know getting a new home makes you want new furniture, new wardrobes, it only makes sense you have a desire for a new car. BAD IDEA! Unless you're independently wealthy and paying cash for both car and home, you are probably financing that car. And guess what? that's impacting your overall credit worthiness... your finances.... you know that thing that lenders are looking at to see if you are "good" for the home.
I had a client in August looking at homes. He was all set, prequalified and everything. We looked at a couple of properties. Then two weeks later, the lender calls me to say, there is no way my client will be prequalified. Why? Because, he was trying to be savvy in shopping for a new car. He shopped around at several dealerships to look at the best rates. You would think he went the right way? Wrong. Unfortunately, he had over 47 credit pulls in three days from all the times he "shopped" for a car. This dropped his credit over 100 points and seven months later, we still can't get his credit high enough to afford a loan for a home in the same neighborhood we originally looked in.
In talking with other realtors, this is probably one of the 5 most common mistakes new home buyers make. Don't let that excitement go to your head. Wait until after escrow closes!
4. Career Changers
Imagine you've been house hunting in a very competitive market (ie. in your price point you are competing with investors and multiple offers on every home.) In fact, imagine you have been house hunting for almost 6 months and have had 4 offers declined to other buyers, and the three where you did get accepted inspections yielded insane structural flaws that cost more than the house purchase... you are tired. But then you find it! The one. The problem? you almost lose the house and get to have a two week delay in closing because you change jobs. Does this happen? Well, it did for me. I switched schools I was teaching at in the middle of the purchase. My poor agent at the time almost had a heart attack (but because of all my struggles getting a house, the whole ordeal ended up inspiring me to help others find their home). Lenders have to verify your employment to ensure you are "good" for the loan. And often times, these checks continue up until closing.
The same can happen with women who end up on maternity leave, or take a leave of absence. This is one of those mistakes home buyers, especially first time home buyers, make. And just because you have been prequalified, doesn't always mean the deal with go through. Think of closing on a home as putting a toddler to bed... they are very fickle creatures and things go sidewise very quickly.
My advice? From the moment you get prequalified, to the moment you close/sign those papers-- you put your financial life, nay, your entire life on hold. No job changes, no new credit cards, no new card charges... nothing. Zilch. Nada. Don't mess with your credit.
5. Cheaper isn't always better.
Home buying is expensive. Depending on the loan you qualify for/best fits your needs, you will need between 3-20% of the overall homes cost for the down payment. AND people often don't realize you will also need around 5% of the overall homes cost for the closing costs and fees. Yes, ladies and gentlemen, that's one very large check. And even that can vary, depending if you or the seller have to pay for title, surveys, home warranties, appraisals, repairs, etc. Even if you have all of that, once your offer on a home gets accepted, you have 3 days to remit checks to title, the option fee (in my neck of the woods, you could expect around $100 for this) and the earnest money (your goodwill deposit that you want to buy the home....and is typically 1-3% of the homes value). Now your offer is accepted, now what? You need to hire an inspector.
Home inspections can cost from $300-$500 in my area for homes under 3500 sq ft with no crawl space or pool. So you find Bob the Builder, or your uncle, or whoever you found in the yellow pages that can do it for cheapest or free. Great deal? No. This is not the time to cheap out. I know its scary spending all this money, especially for first time home buyers or single home buyers... But you really need a professional, qualified home inspector.
My recommendation to clients, find the guy with the reviews you can trust (always ask for sample reports.... they can provide them so you know what to expect from them). I prefer inspectors that are overly zealous and meticulously detailed in every aspect of the home. The more detailed the better. You want a clear picture of what you're getting. EVERYTHING needs to be inspected. That way, when we negotiate with the seller for repairs or closing cost credits, you have a report to detail the specifics.
It is the buyer's responsibility to ensure your inspector is qualified and thorough. It's not the time to look for the best deal. Otherwise, you might purchase a home and have the water heater fail in two weeks and the ac system to be replaced the following month like I did.
There's probably a mountain of other mistakes agents might remark on, but these are definitely my top 5 no-nos. Your take away? Don't mess with your credit!