On this page of my Home Buying Course, you will learn house hunting tips that you can use to avoid costly mistakes in your homebuying journey. Below, you will find a table of contents that you can use to navigate to the sections you want to read most.
If you have any questions or want to get started with me as your loan officer in your next purchase transaction, please scroll to the bottom of the page, fill out the short form and I’ll be in touch quickly to assist.
Looking for my top home loan lending mistakes to avoid?
Looking for a Home Before Talking to a Lender
Unless you plan to pay cash for a home, you should consider speaking to a home loan lender such as myself first. By talking to a lender, you will be able to discover your estimated loan maximums, find the estimated payment for your goal purchase amount, learn about things you may not realize about purchasing a specific property type with a mortgage and SO much more.
Consider getting pre-qualified first! Your pre-qualification with me as your lender will come with a full review of your financials, inspection of income and an automated underwriting review. Once completed, you’ll be issued a pre-qualification letter that your Real Estate Agent will use to submit offers.
Many real estate agents will request you to get a pre-qualification letter before they will take you home shopping.
By talking with a lender first you will avoid making offers on homes outside of your price range, delays with financing due to a discovery of your financials that need to be addressed first and you’ll have less chance to be fully selective of your home loan options.
Overlooking Mortgage Programs and Solutions
The mortgage industry as a whole realizes that no two borrowers are the same and because of this, there’s a large range of mortgage options made available to mortgage lenders that you may or may not be aware of.
As explained in the talking to a lender section above, when you speak to a mortgage lender at the beginning, you’ll have much more time to explore your home purchasing options. Maybe you need to ask for seller concessions towards closing costs? Maybe you want to save up more money for a down payment to get reduced mortgage insurance? Maybe you need Utah, Nevada, California or Arizona down payment assistance? Perhaps you qualify for USDA Rural with no down payment but not sure which areas are eligible?
Never assume you need 20% down and keep an open mind about your options. Give me a call to discuss your mortgage options!
Assuming You Won’t Qualify for a Mortgage
Every year I discover borrowers who felt they would never qualify because, at one point in their lives, life happened which caused a big blemish on their credit history.
Perhaps you think your credit score is too low or that buying a home is “hopeless.” What if I told you that many of my clients were able to go to a recommended credit repair specialist and within 6 months, was able to buy?
I’ve also had clients who assumed their score was too low but found out that their scores were high enough certain loan programs.
Maybe you’ve made mistakes in your past that cause you embarrassment. With Scott Buehler as a Senior Mortgage Consultant, you’ll have access to someone who does not pass judgment that’s excellent at problem solving. My team and I remove the emotion out of the equation and get right to figuring out exactly what we need to do to help you realize your homeownership dreams.
Assuming Your Credit is Excellent
Perhaps the last time you needed a loan, your credit was amazing. One big mistake I see from clients is the assumption that everything is still fine.
Rather than assume everything is going to be OK, head on over to AnnualCreditReport and gain free access to your full credit report from all three bureaus. During the pandemic, this service allows free weekly review of your credit report. Outside of the pandemic, you are able to review your credit report annually and I strongly encourage you to do so!
By reviewing your credit report, you will be able to discover identity theft, unauthorized tradelines, find errors, see negative marks to discuss with your loan servicers and so much more.
Definitely download your report and print them out if you can. Careful inspection of your entire report may turn up some nasty surprises that you can begin addressing.
Being Careless with Credit
Your credit matters! Since you can never possibly know when you will need a good credit history to buy that amazing home you’ve dreamed of owning, it’s important to stay on top of it at all times, even when life throws you a curveball.
A good credit history will likely pay off huge in the future. Want to learn what makes up a credit score? Consider downloading and printing the below guide!
Assuming a Big Down Payment is Required
Still thinking 20% down is mandatory to buy a home? This long-held belief does help you avoid paying private mortgage insurance on a Conventional home loan, but it not a requirement.
In fact, there are lots of first-time homebuyer programs available to help you with little to no money down. According to the National Association of REALTORS®, in 2019, the median down payment was 12% for all buyers, including 6% from first-time homebuyers and 16% for repeat homebuyers.
Before delaying your home purchase to save up 20%, consider talking to your lender about your options now. With the recent housing market value trends, saving 20% may result in waiting even longer than anticipated.
There are multiple no-money-down and low-money-down mortgage options to discuss! Let’s talk and begin planning now for your future home purchase!
Accruing Too Much Debt
A majority of loan approval decisions hinge on your debt-to-income ratio that will include your future mortgage payment.
If buying a home with a home loan is in your future, consider keeping your overall debt commitments as low as possible. This will likely improve your overall loan limits which allows you additional flexibilities in your homebuying decision.
Nearing a home purchase? Before financing a large purchase, consider running it by your preferred home loan lender to see how it might impact your qualification!
Not Getting Prequalified with a Lender Early Enough
Trust me when I say, get pre-qualified as early as possible in your home purchase journey. This will put time on your side to address many problems that can come up in your loan.
Example: Above, we talked about assuming good credit. What if you decide to enter into a contract to purchase a home only to discover there are unauthorized credit card accounts that have heavily impacted your scores? Often, you will need months to address the issue but you’ve already entered into a 30-day agreement! Not good.
There’s a lot that can be unveiled in speaking to a lender early on in the process. When you speak to me as your lender and apply for a home loan, I will be able to review your credit report, go over your income documentation and discuss concerns early in the process so you’ll be prepared.
Enjoying these homebuying tips? I’d love to know your thoughts of this home buying tips guide! Please reach out and let me know how this has helped!
Not Planning for Mortgage Closing Costs
Almost everyone is aware of down payment requirements but many do not plan for mortgage closing costs.
There’s a lot that goes into a home loan that you need to be aware of. There’s usually loan costs that vary lender to lender, an appraisal fee, title insurance fees, prepaid property taxes, prepaid homeowner’s insurance and many other fees involved.
In order to get a better idea of your loan costs, ask your lender for a Closing Cost Worksheet, fee sheet or some other documentation that outlines a fee estimation based on your goal home purchase price.
Waiting for a Real Estate Market Crash
Consider Speaking to a Real Estate Agent! Want advice from an expert on timing your home purchase? Consider speaking to an experienced real estate professional to get their thoughts on the current real estate market. Guild Mortgage does not offer real estate services.
Are you able to predict the future? If you can, you’d make way more in the stock market!
Perhaps you’ve read a report that indicates what may happen in the near future. Nobody wants to buy a home that suddenly loses value, that’s very understandable.
In my experience though, what usually happens is someone will decide to wait for a real estate market crash and will miss out on very real opportunities.
There’s a lot of factors to consider in attempting to time your purchase that may just keep you “on the fence” for years to come. During that time, you could have been making payments towards your loan, realize value increases from typical inflation and more.
If you buy a home you can afford now, you provide yourself with additional security as well. Consider a fixed-rate Conventional 30-year mortgage as an example, the only reason your payment would go up is for property tax or homeowner’s insurance increases. Your principal and interest payment will remain the same unless you refinance the mortgage.
With the example above, you’ll likely earn more and more income through the years which should make your mortgage payment easier and easier.
Not Using a Real Estate Agent
A real estate agent may be able to provide you with many additional services, advice and guidance on your home purchase.
In most transactions as a buyer in most states, the home seller is the one that pays the commission for your agent. This means you’ll be able to access their expertise and knowledge at no cost to you.
Some benefits of having a Real Estate Agent represent you include:
- Neighborhood knowledge and fact reports.
- Access to home value comparables to advise on home values.
- Contract negotiations and renegotiations.
- Better access to all real estate listings to find more homes that match your criteria.
- Writing up the Real Estate Purchase Contract and deciphering paperwork.
- Navigate the home inspection and negotiate repairs.
- Understanding seller disclosures in your state.
- Assistance in getting possession including keys.
- After-closing services including repair referrals.
As you can see, there’s many services that a Real Estate Agent provides that you may not have thought of. Although an agent is not required, a real estate attorney or some sort of representation is strongly recommended.
Not Considering Seller Concessions
What are seller concessions? Seller concessions are closing costs that the seller has agreed to pay for the buyer. Most loan programs specify a percentage limit for seller concessions that sellers can provide to buyers. These seller concessions are especially helpful when a buyer needs to come up with unavailable cash to close the deal.
Perhaps you didn’t account for closing costs when you saved for a home purchase and only have enough for your down payment.
One of the ways we can address this on your home loan is to ask for seller-paid closing costs. Although there’s no guarantee a seller will accept, a short conversation between your lender and real estate agent may result in contract negotiations that will result in a majority or all of your closing costs being covered.
There’s certainly strategy involved! If you’ve chosen me as your home loan lender, ask me more on how this works including the pros and cons of this type of offer.
Skipping the Home Inspection
Never neglect to inspect! During the “Due Diligence” phase of your home purchase, you have an opportunity to hire a home inspector to review the home and to provide an inspection report with details of the property condition, recommended repairs, maintenance concerns and much more.
From a new construction to an existing 1920s home, it is always recommended to hire a home inspector to uncover potential problems or issues that aren’t visible to the naked eye.
A home inspection is not an appraisal. Although certain programs like FHA loans include a property standards inspection with an appraisal, many other popular loan programs like Conventional only require an overall valuation of the property.
Even when you have an appraisal that includes an inspection, you should know that the inspection is to look for safety, sanitary and structural soundness to make sure it meets standards requirements of a specific loan program.
When you hire a home inspector, they are working for you, the buyer, to perform a much more thorough review of the entire property. It is not uncommon for a home inspector to flip every electrical switch, climb into attics, explore crawl spaces, test HVAC units for heat or cool air, walk around the entire property, flush every toilet, check all sink drains, try every door handle, review overall workmanship of the home build and so much more.
Not Studying the Neighborhood and Neighbors
Most homebuyers don’t give a second thought into the surroundings of a home. This is one of the most overlooked home shopping tips that could result in a horrible homeownership experience.
Let me share a personal experience I had when I bought my first home. My wife and I loved the property, it fit within budget, it returned a clean home inspection and nothing appeared to be wrong.
Within a week of unloading our U-Haul, there it was, the most frustrating and aggravating homeownership experience of our lives. You see, every Friday night, my neighbors practiced playing for their rock band. They knew the right hour to quit playing for noise ordinances. The problem, at the time, I was self-employed and worked best at night. Try sleeping with a rock concert going on in the distance.
It doesn’t hurt to knock on doors to introduce yourself to your neighbors. It’s also a good idea to park your car and listen to the surroundings at different times of the day and week to get an understanding of the typical noise in the area.
Underestimating Homeownership Costs
There’s additional expenses to watch out for when buy a home. While most consider principal and interest of a home mortgage payment, what about property taxes (varies by area), homeowner’s insurance and HOA / Condo fees?
Beyond the overall mortgage payment, there’s other things you should be watching for when buying a home. Here’s a list of things to watch for that should also turn up in a home inspection.
- A roof with asphalt shingles will need replaced every 15-20 years.
- How old is the HVAC system? Will it need replacement?
- Electrical issues such as arc faults, faulty wiring, electrical shorts and more.
- Plumbing issues, leaks, mold.
- Pest control including termite damage.
- Landscaping and lawn care including sprinkler system.
- Lead-based paint removal
- Maintenance costs (fireplace chimney sweeping, siding / stucco repair, deck staining, etc)
- Kids (hurricane children can due a number on carpet and walls)
- Neighbor agreements. “Want to go half on a wall?”
Hopefully this section gives you a better understanding of homeownership costs to consider when buying a home that you may not have considered.
Forgetting About Moving Expenses
Perhaps you have enough funds for your down payment and closing costs, but you are “all in.” Don’t forget that you need to actually move your stuff to your new home. If you are out of state, consider getting quotes from moving companies or self-moving services to get a better understanding of what these costs will be!
Did you know? Some Real Estate Agents provide use of their moving vans to move your stuff from one home to another! It’s worth asking around to find out what services a Real Estate Agent provides (if any) to assist with your move.
Thinking About the Next Home Too Soon
What you want and need right now in a house and what you’re going to want and need in the future may be different. When buying your “stepping stone” first home, be sure to cross-reference your needs and wants list to ensure more of the things you need right now are covered in the home you are considering.
You never know what may happen in the future that could potentially make you feel “stuck” in the home you have. Where possible, definitely try to fill most, if not all of your needs list in your initial purchase so you’ll be able to remain longer, should you need!
The benefits of remaining in a home longer term before moving up includes a likely appreciation in value, having more equity to purchase another home, access to possible tax deductions, lower stable payments and the possibility of paying it down enough to turn it into a rental and buy another.
The Value of Scott Buehler by Your Side! Hopefully these home shopping tips, resources and ideas to avoid mistakes during home shopping has really helped you in your homebuying journey! I’d be honored and excited if you chose me as your trusted mortgage consultant for your home loan. I’ll happily answer any of your questions or concerns throughout the entire process.
Start my 60-second mortgage questionnaire to begin!