Buying a home is always a big decision, but when you're a first-time buyer it's even more important to get it right.


Without home-buying experience to draw on, it's easy to make mistakes you could regret for years to come. Here's what to avoid

1) Don't Rush the Mortgage


In the excitement of buying your first home, it can be tempting to sign up for the first mortgage offer you're approved for. Being too hasty is a serious mistake which can cause difficulties for a long time to come.


It's a good idea to speak to an impartial mortgage adviser before committing yourself to any deal, but in any case, always bear some simple points in mind.


- Be very cautious about how much you try to borrow, making sure you leave plenty of headroom in your budget. Owning your own home has many extra costs compared to renting, and you need to leave yourself some breathing space to handle them.


- Explore your down payment options. The larger the down payment you can afford, the lower your monthly payments will be. Could it be worth waiting a couple of years to save up a bigger deposit? However, don't break the bank to increase your down payment, as you'll need to keep some cash in reserve as an emergency fund.

 

2) Get a Pre-Approval


But whichever mortgage you wind up getting, set the process in motion with a pre-approval before actually searching for a home. Doing this has several advantages,


- It lets you know exactly which price range you can search in, so you don't waste time viewing homes which are over your budget.


- It puts you in a stronger position to drive a bargain, as the buyer knows you can access the funds to complete the purchase.


- Seeking a pre-approval will give you an early warning about any credit rating problems or other delays which could slow things down. You don't want to see your dream home slip through your grasp because of unnecessary delays.

 

3) Hire a Buyer's Agent


Most sellers will have a real estate agent to handle their side of the transaction, but it's less common for a buyer to hire their own agent. However, there are several good reasons why you should consider doing so.


- Having an expert fighting in your corner means you're much more likely to pay a realistic price.


- You'll have a better chance of spotting problems with a home before you're committed to a purchase.


- A buyer's agent also speeds up the purchase by smoothing out glitches and making sure you're fully prepared at every stage.


- A good agent's experience and contact list mean you can find the right property more quickly.

 

4) Arrange a Full Home Inspection


Before proceeding with a purchase, hire the services of a reputable home inspector. A good inspector will make sure no nasty surprises are waiting for you with the property's heating system, plumbing, roof, or general structure.

 

5) Be Careful During Closing


Lastly, once the buying process is underway, avoid making any changes to your financial situation. Don't switch jobs, take out new credit, or spend large amounts of money.


Anything which changes your credit status, even just by a small amount, could introduce delays or even kill off the sale altogether. Be patient until you finally have the keys to your new home in your hand.


There are plenty of pitfalls lying in wait for the first time buyer. However, if you take your time and learn from others' mistakes, you'll soon be happily moving into your new home.

Read full post

Securing pre-qualification, pre-approval, and mortgage commitment letters can simplify the mortgage application process. These steps can also help home buyers avoid disaster. They don't need all three, however.


Mortgage Pre-Qualification and Buying a House


Future home buyers can get pre-qualified for a home mortgage long before they ever start house shopping. Used mostly by buyers to gather information and ask questions, this process is quite informal. Applicants have a consultation with a mortgage lender. He or she will ask a range of questions about debt, finances, the type of home the applicant would like to have, and the requirements for various loans.


Using this information, the mortgage lender will then provide the applicant with a range of information. First, the lender will discuss any details in the applicant's financial profile that may cause issues with the approval process.


He'll also discuss mortgage types, their requirements, and what borrowers need to be approved. This gives people looking to buy a home time to fix any credit problems, ensure they have the down payment, and that they make enough money. It also gives applicants an idea of what size of a mortgage they could get, and therefore, what kind of houses to look at.


Mortgage pre-qualification has no real value outside of acting as a starting point. The lender doesn't verify any financial information, run any checks, or give binding mortgage estimates. Therefore, it's unwise to use mortgage pre-qualification as a negotiation tool when buying a home. For that, consider getting pre-approved.


Mortgage Pre-Approval and Home Buying


Being pre-approved for a home loan is like the middle ground between pre-qualifying and submitting a mortgage application. During this process, the mortgage lender will review and verify an applicant's financial information to determine their creditability. This can take some time, but it costs nothing. And once someone has been pre-approved, they can demonstrate to the seller and real estate agents that they're serious about negotiations. It can also speed up the mortgage approval process, which can be a huge benefit in a hot housing market.


To be pre-approved for mortgages, applicants will need copies of their credit reports and give the lender permission to do a hard tri-merge check, which pulls reports from the three main credit bureaus. The lender will also need a few month's of bank statements and pay stubs, tax returns, any sort of asset verification, and proof of any other forms of qualifying income.


When the underwriter returns the application, they will say that it has been approved, approved with conditions, suspended, or denied. If it has been approved or denied, this part of the process is over. The borrower can move to the next step, try another lender, or fix their financial issues. If the application was suspended, it means the underwriter requires more documentation or information before making a decision. Approval with conditions means the applicant will need to satisfy some concerns or requirements before the mortgage can proceed.

At this point, borrowers should discuss locking in the interest rate and loan terms. How long the lock lasts and what it costs will depend on the lender and the mortgage. However, they will protect the buyer from rising interest rates or term changes between pre-approval and the date the mortgage closes.


Mortgage Commitment Letter


To provide a borrower with proof of approval, underwriters can complete a commitment letter. It will include the mortgage type, amounts, and other details. Real estate agents and sellers see this as proof that a buyer is serious and financially able to negotiate for a specific. The property sale can go forward as soon as the seller approves the offer. This puts the ball in the seller's court, so to speak.


Warnings about Pre-Approvals


Borrowers should get pre-approval before choosing a house to buy. Pre-approval and approval both take time. It would also be heartbreaking to fall in love with a property that falls outside the budget. Or, for someone to settle for a home that's well below their approved limit.


Mortgage commitment letters and pre-approval letters are not the same. Applicants can still be denied after receiving a pre-approval letter for a number of reasons. A recent job change, a negative item appearing on a credit report, incurring new debt, or a change in requirements on the lender's side can all cause a denial after pre-approval.


Pre-qualification, pre-approval, and commitment letters all have different procedures and purposes. It's best for anyone wanting to buy a home to understand how these three options work and which one they'll need. They should also apply early and lock in the terms and interest rate as soon as possible. Then, they just have to focus on finding the perfect house and putting in an offer.


Read full post

Purchasing your first home is always an exciting life milestone. However, if you want to make a smooth and easy transition into home ownership, there are a few mistakes you should try to avoid along the way, such as:


Not Shopping around for a Lender


When trying to purchase your first home, the simple act of being pre-approved for a mortgage can be a huge relief. However, it is rarely a good idea to finalize your mortgage with the first lender who pre-approves you. Instead, you should try to shop around with multiple lenders to see who can offer you the best rates and lowest closing costs. Failing to do so could end up costing you thousands of dollars in the long-run.


Failing to Consider the Neighborhood


The house you just saw may be your dream home, but what about the neighborhood? The property's surroundings often have an effect on the quality of life you will enjoy in your new home - so you would be well advised to learn as much about it as you possibly can. After all, the last thing you want to do is make a long-term commitment to a neighborhood you don't enjoy living in.   


Ignoring Issues in the Home Inspection Report


When the seller accepts your offer on their home, it can be tempting to begin to think of the home as yours. However, thinking this way can lead to mistakes. In particular, when buyers begin to get too attached to a home, they tend to ignore issues brought up on the home inspection report. However, you should never be afraid to ask for concessions or even walk away from the home entirely if the inspection throws up something unexpected - even if you absolutely love the home in question.


In Closing


If you attempt to rush the real estate purchasing process, you are likely to make mistakes similar to the ones outlined in this article. However, if you take your time and carefully consider all of your options, you will soon end up in the home of your dreams - without suffering any unnecessary financial damage along the way.

Read full post
Data is supplied by Pillar 9™ MLS® System. Pillar 9™ is the owner of the copyright in its MLS®System. Data is deemed reliable but is not guaranteed accurate by Pillar 9™.
The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.