There is an abundance of advice out there advising how to prepare and the steps to take when purchasing a home. And while it may not seem productive to focus on the 'do nots', it's important to keep in mind the common mistakes that could get in the way of your successful home purchase. Believe us, we've seen the heartbreaking - deals falling apart a day before closing. Let's get you to the closing table!
Tip #1: Try to Not to Get Emotionally Invested
This one might be the toughest. It's easy to get emotionally attached when you find 'the one': the home that checks all of your boxes at first glance. Depending on the time of year or the market you are in, there could be other offers on the property or things could go wrong like the home inspection and the offer could fall through. During the negotiation phase, whether negotiating the initial offer or inspection issues, try to keep your head level and remember the end goal: moving into your dream home.
Tip #2: If Using a Mortgage to Finance Your Home, Don't Change Jobs or Make a Major Purchase Before Close
As tempting as it is to buy that new car to park in your new garage, make sure you avoid making any large purchases. Banks will look at your financial history and want to see any recent activity. The mortgage pre-approval you were given is based on how much money you had in your account and how much money you owed at the time you applied.
Along those lines, mortgage companies like to see stability in your employment - if you can hold off on that career change or early retirement until you close, that would be ideal!
Also, do not deposit or withdraw large amounts of cash. The bank financing will flag large deposits coming in because they may be loans from a bank or another lender. You in turn would have to pay back those loans on top of your mortgage, which would damage your loan to debt ratio. If you are gifted a large sum of money from a parent or family member to help with a down payment, you may need to sign a letter stating that the money was a gift and you will not be paying them back.
Tip #3: Do Not Apply for More Credit or Take Out Any Further Loans
While it is likely you'll want to purchase new furniture for that new home, hold off on opening any new credit cards and taking out any further loans until close. This may seem like common sense but if a friend or family member needs you to co-sign a mortgage then you might not think anything of it. But co-signing a loan can really effect your own chance of being able to get one.
Tip #4: Do Not Overestimate What You Can Afford
Also, make sure you have a full understanding of all of the current costs involved with purchasing a home. For example, if the home is part of an HOA, make sure you understand all of the up-front and recurring fees. Make sure you understand the current tax rate/amount for the home - if the home was recently assessed or the tax data is out of date on the listing, you may be in for a big suprise at the closing table.
Before you even step foot into your first Open House, it is essential that you get pre-approved. Looking for homes outside of your budget is a waste of your time and can wreak havoc on your emotions.
In short...by getting your finances and documents in order for that pre-approval, and taking great care to not take out any new loans or make any new purchases, you can set yourself up for the greatest chance of success upon making an offer. Oh and finding the right realtor, who has the right market knowledge and right connections always helps :)
-Thoughtful Real Estate-