By Scott Gormley,
If you are like most people, purchasing a home is the biggest investment you’ll ever make! If you are considering buying a home, you are likely aware of the complexity of the endeavor and the numerous factors to consider when purchasing a home. That is why it is important to prepare as best you can. Some common home buying principles are presented here for your consideration. By keeping them in mind, you will help create a successful and more enjoyable home buying experience! Since your home could cost you 25-40 percent of your gross income, it is important to conduct research, ask questions and study the process carefully. To better help you, I’ve created the “12 Mistakes Made While Buying a Home” and how to avoid them!
Making verbal agreements
If you’re asked to sign a document containing instructions contrary to your verbal agreements-Don’t! For example, the seller verbally agrees to include the washing machine in the sale, but the written purchase contract excludes it. The written contract will override the verbal contract. More importantly, your state may require the contracts for the sale of real property be in writing. Do not expect oral agreements to be enforceable.
Choosing the lender just because they have the lowest rate
While the rate is important, consider the total cost of your loan, including the APR, loan fees, discount and origination points. When receiving a quote from a lender or broker, insist that the discount points (charged by the lender to reduce the interest rate) be distinguished from origination points (charged for services rendered in originating the loan).
The cost of the mortgage, however, should not be your only criteria.. Have confidence that the company you select is reputable and will deliver the loan with the terms and costs they promised. If in the final hours of the transaction you determine that the lender has suddenly increased their profit margin at your expense, you won’t have time to start again with a different lender. Ask family and friends for referrals. Interview prospective mortgage companies. Oak Valley Mortgage welcomes questions. We believe informed buyers make the best clients for a lifetime.
Not receiving a “Good Faith Estimate”
Within three business days after the broker or lender receives your loan application, you must receive a written statement of fees associated with the transaction. This is both the law and the best way to determine what you will pay for your loan. Bring the Good Faith Estimate (GFE) when you sign loan documents. You should not expect to pay fees which are substantially different from those contained in your GFE.
Not getting a rate lock in writing
When a mortgage company tells you they have locked your rate, get a written statement detailing the interest rate, the length of the rate lock, and program details.
Using a dual agent-i.e.,an agent who represents the buyer and the seller in the same transaction
Buyers and sellers have opposing interests. Sellers want to receive the highest price, buyers want to pay the lowest price. In the standard real estate transaction, the seller pays the real estate commission. When an agent represents both buyer and seller, the agent can tend to negotiate more vigorously on behalf of the seller. As a buyer, you are better off having an agent representing you exclusively. The only time you should consider a dual agent is when you get a price break. In that case, proceed cautiously and do your homework!
Buying a home without professional inspections
Unless you are buying a new home with warranties on most equipment, it is highly recommended that you get property, roof and termite inspections. This way you will know what you are buying. Inspection reports are great negotiating tools when asking the seller to make needed repairs. When a professional inspector recommends that certain repairs be done, the seller is more likely to agree to do them.
Not shopping for home insurance until you are ready to close
Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and do not have time to shop around.
Signing documents without reading them
Whenever possible, review in advance the documents you will be signing. (Even though some specifics of your transaction may not be known early in the transaction, the documents you will sign are standard forms and are available for review.) It is unlikely that you will have sufficient time to read all the documents during the closing appointment.
Creating delays within the transaction
In a perfect world, all real estate transactions close on time. In the world we live in transactions are delayed a week or more. Suppose you asked your landlord to terminate your lease the day your purchase transaction was scheduled to close. A day or two before your scheduled closing date, you discover your transaction is delayed a week. In a perfect world, no one is inconvenienced and your landlord is willing to work with you. More likely, however, your landlord is inconvenienced and angry.
Will you be thrown out? Will you have to find interim housing for a week or more? The eviction process takes a little time, so the Sheriff won’t immediately remove you, but this type of stress-producing episode can be avoided. How? Terminate your lease one to two weeks after your real estate transaction is scheduled to close. That way, if there is a delay in closing your transaction, you have some leeway. This approach might cost a little more, then again, it might not!
Taking out new loans before you have completed the loan process
NEVER take out new loans to include either credit cards or car loans before you close on your purchase transaction! If your debt ratios are marginal to begin with, you could jeopardize your ability to close on your transaction and end up being either turned down or offered other options.
Existing loan obligations
ALWAYS continue to make your payments on existing debt as payments are scheduled. It is not uncommon that investors do a last minute audit that could result in an updated credit report being pulled. The last thing you want to do is to have any late payments pop up!
Scott Gormley
Broker/Owner
Oak Valley Mortgage
Direct: 530.361.6202
Fax: 530.267.5555
Website: www.OakValleyMortgage.com
“California Mortgage Solutions”
