Common new home buyer mistakes
I was talking with a co-worker recently who was preparing to purchase his first home. He recently got married, and has been renting for a few years. He felt that he had a good down payment and with the economic stimulus benefits for new home buyers, now was the time. I couldn’t disagree with him, for him it was time.
Now is a great time to buy a house, but there are some very common new home mistakes that I shared with him and will share with you as well:
Get Pre-ApprovedMost new home buyers don’t understand the difference between being pre-qualified vs. pre-approved. A pre-qualification is just a mathematical formula that mortgage companies use that serve as guide to how much home you can afford. It is in no way a commitment that you can actually get that amount of money. A pre-approval is just that, a commitment from the mortgage company that they will loan you the money. Being pre-approved will not only allow you to focus on the homes you can actually afford and are approved for, but can often give you more negotiating power as well. It’s similar to purchasing a car and bringing cash with. Something about having cash in hand sure can motivate a seller to negotiate!
Closing CostsWe made this mistake too. Everyone always focuses on the purchase price and down payment, and seems to forgot how expensive closing costs can be. Beyond the down payment, you will need extra funds to pay your lawyer’s fees, property taxes, land transfer taxes, etc. There is a ton of little fees and costs that most new home buyers don’t consider. Your real estate agent can give you a very close approximation of what the costs will be. Once you make the offer and begin the purchase process, your lending company will provide all of the actual costs for you. Just don’t forget these additional costs, and make sure you have the cash available so you can close.
...