When it’s time for you to travel the path to homeownership, the best thing you can do is learn what you can about the process so you know what to expect along the way. In today’s blog post I’ll talk about the top five mistakes home buyers make and how to avoid them.
1. Know Your Credit
Take the time to find out what your credit score is. If it is low, then find out how you can improve it. This first step is extremely important.
The major factors that effect your credit score are:
1) Payment history, which is about 35% of the total score.
This indicates how well a borrower is able to pay on time. Recent late payments of any kind, including utility bills, and mortgage late payments weigh the most heavily.
2) Level of indebtedness
This is the balance of a credit line versus the total limit, and is about 10% of the score. Ideally the balance will be under 40% of the limit. The lender will look at car loans, college loans, credit card bills, etc.
3) The length of your credit history
2. Get a Pre-Approval
A pre-approval should be the first thing on your list as a home buyer. A pre-approval shows that you are a serious buyer and it determines how much you will be able to afford to pay for your new home. These are the documents often required when applying for your pre-approval:
• Driver’s license
• Social security card
• 2 years of tax returns
• 1 month of most recent paystubs
• Proof of other sources of income like child support, trust, or self-employment
• Proof of employment via letter from employer
• Up to 2 months of most recent bank statements
These documents help lenders verify your ability to purchase and own a home.
3. Hire a Professional Real Estate Agent
Your agent should know the area you are shopping in. Your agent should know that market, the inventory, sales history and keep you posted as soon as houses come on the market that meet your needs. Your agent will also prepare your offer, help you negotiate and guide you through all phases of the transaction.
4. Shop for your Mortgage
Not all mortgages are the same! Even as little as a of a half percent can cost you thousands more over the life of the loan. COMMONLY REQUIRED DOCUMENTS
• Driver’s license
• Social security card
• 2 years of tax returns
• 1 month of most recent paystubs
• Proof of other sources of income like child support, trust, or self-employment
• Proof of employment via letter from employer
• 2 months of most recent bank statements (you may not need that many, but it’s better to be over-prepared than not prepared enough)
Mortgage lenders will ask for these documents to verify your ability to afford the home you wish to purchase.
5. Get a Home Inspection
Do not make the mistake of foregoing the home inspection. You need the inspection to uncover any potential hidden defects. A licensed, professional inspector is trained to look for these things. You should also have a pest inspection, radon inspection (if radon exits in your area) and an oil tank sweep (if there was ever the potential of oil heat in the area.)