The learning curve is pretty steep when it comes to buying your first home, simply because many factors are involved. Finding the right home, budgeting for the down payment and mortgage payments, understanding the terminology and even picking the right neighborhood are just some of the things a first time home buyer must consider. To avoid home buyer mistakes, create a checklist of everything you need to do to buy your first home.
1. Shopping for a Mortgage
Never agree to the first mortgage you find. Different banks have different products available. Additionally, banks look at your profile in different ways. You may not qualify for a loan at Bank A but you could easily qualify at Bank B. Before you allow a bank to pull your credit score, know what your score is – tell the bank and have them come back to you with a pre-approval. Once you get three or four pre-approval letters, you’ll be able to compare loan products and interest rates. Then, you allow the bank you choose to pull your credit.
2. Picking a Realtor
Don’t just pick the first realtor you come upon. You need to find a realtor who you feel will do the work needed to find your home. You also need to get along with the realtor. Always meet a realtor in person if possible. Check references for the realtor and be sure to ask about his or her sales record in the area.
3. Know What You Want
Don’t make the mistake of finding the perfect home and then hedging because you’re not sure what you want. Currently, it is a seller’s market, which means that there is a shortage of homes on the market and competition for most homes is high. Additionally, you may see that interest rates are increasing and markets are not as affordable as they once were.
4. Know What You Can Afford
Don’t make the mistake of thinking you can afford a certain payment and then get surprised when you are turned down for a loan. Know how much down payment you have or will be able to come up with and know what your debt to income ratio is. If you think you can afford $1,500 per month but your debt to income ratio shows otherwise, you won’t be able to get the loan.
5. PMI Insurance
Private mortgage insurance is added to the loan if you do not have a large enough down payment. Generally, to avoid this extra payment, you’ll need 20 percent down. Have a good down payment strategy.
6. Don’t Skimp on Surveys and Title Insurance Policies
These are, in most cases, optional costs. Don’t skimp on them to save a few hundred dollars. A land survey shows you where the property boundaries are. Even if they are marked, you should have the property surveyed since landowners could move the markers. A title insurance policy protects you if something is wrong with the title.
7. Don’t Skimp on Inspections
Always get the recommended inspections. These include a home inspection and a pest inspection. Not all sellers will disclose problems even though they are required to do so.
8. Never Buy Sight Unseen
Pictures can make a bad home look nice. You should always visit the home in person. If you absolutely can’t, have a friend or relative visit the home. You may also have your real estate agent take his or her own pictures of the house to show you, though it is better to have someone who doesn’t have an interest in the purchase of the home check it out for you.
9. Use the Bottom Line if You Are Self-Employed
When applying for a mortgage, you need to figure your debt to income ratio based on your adjusted gross income. This is the amount shown on your tax returns after all expenses, depreciation and amortization have been deducted. You will be in for an unpleasant surprise if you state that you make $3,000 per month, but your tax returns show an average of $300 per month because of your deductions.
10. Always Work With a Real Estate Agent
Some people prefer to find a home themselves. However, between deciding to purchase and the closing, many activities must take place. A real estate agent can make sure you don’t miss deadlines and help you be sure you have everything needed for closing on time.
Contact On Point Carolinas Realty
If you are in the market for a North Carolina home, contact On Point Carolinas Realty today.