In the 25 plus years assisting individuals to buy a home, the 8 things I am going to discuss are the things that cause the most stress and issues when purchasing real estate. The reason for this article is to make sure I do everything I can for home buyers to make the purchase an enjoyable process and a process that’s fun to go through every 5 to 8 years.
My name is Lisa Barrientes, NMLS #1389106, and I work for Elite Financing Group, LLC. My work is my passion as I enjoy helping home buyers get into a good home and educate the masses so they can attain their financial goals. Let’s get started.
What Not to do When Buying a Home
- Spending Above your Budget: A lender can approve your for more than you are comfortable with. The lender is going by your debt-to-income ratio based on what is appearing on your credit report and not accounting for other monthly expenses. These other expenses that are not reported to your credit are childcare, payment plans with dentist, etc., monthly utilities, and other expenses you will know about that the lender will not since they only know what is reporting to the credit bureau. It is up to you to know what you can afford monthly. Many people will take the larger loan amount and causes them to spend above their budget. This is what is called house poor.
- Not Making an Absolute Needs List: This is a list of your non-negotiable things you need in a home. This will include how many bedrooms and bathrooms you need logistically for you and your family. You must list all needs for the home you are looking for to make your home the right purchase. This will save you time and to not end up in buyer’s remorse. This will allow the real estate agent to show you the homes that satisfy your non-negotiable things and keeps you from getting excited about a home in a great neighborhood only to find out it does not have your non-negotiable needs.
- Do not Submit Wildly Lowball Offers: This method offends the seller and will make it difficult to work with a good realtor. A good realtor will not work with a client for long term if you are going to waste their time and the sellers time by submitting those offers. Real estate is a market and obviously, there is room for negotiation, but a seller is basing the selling price on many factors based on market conditions and personal items they will need to pay from proceeds or use to purchase a new home. Your realtor will be able to find homes in your price range and it is a good idea to put your price range on your non-negotiable items to avoid having to lowball offers.
- Do not Buy Big Debt Purchases: Once you get pre-approved, you want to avoid buying a new car or put thousands of dollars on a credit card. Avoid purchasing furniture for your new house. Do not co-sign on any loans. A lender will pull your credit again right before closing to see if there are any new debts that could cause your debt-to-income ratio to change. Big debts will increase your debt-to-income ratio and cause you to lose your pre-approval.
- Do not Change Jobs: Changing jobs to a different company, even if getting a raise, can cause your loan closing to be delayed and could jeopardize your home purchase. Depending on if you change your field or just move to another company for a promotion, you may need to wait to get one to two pay stubs. This can take up to 30 days and the delay may cause the seller to refuse to extend the contract signed and agreed to for closing. The seller has the option of extending the contract or walking away once you have missed the contract date agreed to on the purchase agreement. If you are under contract, do not change jobs. Tell your lender about any expected job changes as soon as you know it.
- Do not have Unrealistic Expectations: Have a realistic expectation on how long the real estate process will take. When you get under contract, it can take up to 30 days to close. So many people, even when told it will take 30 days, will call to see if they can move up the close date to only allow 2 weeks for the entire process. This puts undue pressure on all parties involved in the transaction and can open the process to errors due to rushing. To have an enjoyable experience, you must be patient and respond quickly to request. You must also have realistic expectations about the payments based on the loan amount you are requesting. Many people want to purchase a $500,000 home and keep the payments below $1200. This is not realistic compared to the purchase price of the home. One of the best ways to avoid unrealistic expectation is to ask what the process is and what to expect.
- Do not Make Large Deposits to your Accounts: All large deposits must be tracked and documented. This is 50% or more of your monthly income. This means if you sold a car and put the funds into your checking or savings account and is documented on your statements, the underwriter will request all supporting documentation to determine if the large deposit can be sourced. If not, they will remove this amount from your ending balance and may cause you to be short funds for closing. This will cause delays and possibly a denial of the loan.
- Do Not Stress: The more stressful you are the higher risk of errors and delays. Relax and trust the experts you chose to get you through the process. The more pressure you put on your team can result in increased aggravation, avoidance of calls, and to make mistakes in the process. Try to be helpful in all ways and make sure you follow up reasonably to avoid any complications.
My advice to experienced and not so experienced purchasers is to produce a plan, hire people with experience, ask questions, and know the process. Avoid these 8 things to allow yourself to enjoy your home buying experience and get what you want out of the process.