July 31, 2017 | Bob Myers
Buying a home—especially if it’s your first—can be a lot like losing weight in the sense that people end up doing, well, some pretty dumb stuff in the process.  While desperate dieters might waste money on  “magical” weight-loss pills or silly exercise equipment (remember  the  shake weight?), misguided home buyers could be doing far more serious damage—like  undermining their ability to purchase a house at all.  Don't be one of  them!  We asked real estate agents to shed light on  some of the dumbest reasons people can't buy a home. The good news?  These flubs are easily avoidable.  Read on and beware.

Reason No. 1: Waiting to line up financing

Your first step in the home-buying process should be to meet with a mortgage lender to discuss your financing options, says Benny Kang, a real estate agent in Irvine, CA.
“You don’t truly know what you can afford until you meet with a lender,” says Kang. In other words, just because you think you can buy a $1 million house doesn’t mean you can actually get a loan to purchase a home that nice.

Reason No. 2: Using a fly-by-night mortgage lender

The mortgage industry is rife with scams—including a slew of fake or unreliable lenders. Placing your trust in a bad lender can cause a deal to fall through. That explains why “sometimes sellers reject offers because of the buyer’s lender,” says Philadelphia real estate agent Kathy Conway.  To make sure your financing is rock-solid, ask your real estate agent for lender recommendations instead of, say, just Googling it.  And read up to know your mortgage basics.

Reason No. 3: Getting pre-qualified rather than pre-approved

Pre-qualification and pre-approval might sound similar, but they’re not.  Essentially, anyone can get pre-qualified for a loan, because it only involves having  a conversation with a lender about the state of your finances  (no  documents are exchanged).  Getting pre-approved,  meanwhile, involves the lender gathering all necessary  documentation—your tax returns, bank statements, pay stubs, and  more—packaging the loan, and  submitting the file to an underwriter for review.  If everything checks  out, the lender will issue you a written  commitment for financing up  to a certain loan amount that’s good for up  to 90 or 120 days.

When you submit an offer on a home, you’ll need to include a pre-approval letter from your lender, says Conway.
“Educated  sellers won’t even entertain an offer unless the buyer has a letter  of pre-approval” from a reliable lender, Conway says.      

Reason No. 4: Shopping outside your price range

“It   sounds obvious, but some home buyers just have trouble sticking to a   budget,” says Kang. Therefore, resist the temptation to shop online for homes that are simply outside your price range (i.e., how much you’ve  been pre-approved for).

Reason No. 5: Making lowball offers in a seller’s market

You need to rely on your real estate agent to determine whether a house that you’re interested in has a fair listing price. (Your agent will do this by performing a comparative market analysis, which entails  looking  at recently sold properties that are comparable to the house  that’s up  for sale.) If a home is priced well, it might make sense to  offer full  price, says Kang.  Moreover, “if you’re in a seller’s market,  making a  crazy lowball offer can piss off the seller” and kill your  offer, says  Kang.

Reason No. 6: Writing a bad personal letter to the seller

If you’re competing against other buyers, writing the seller a personal letter can help strengthen your offer. But Julie McDonough,   a real estate agent in Southern California, says some home buyers are   inclined to overshare, in which case a letter can actually hurt your   offer.

“Stick to the fact that you  love the house and the  neighborhood,” says McDonough. “Don’t get into  personal details” such  as the fact that you’ve lost out on other homes  or want to remodel the  dated kitchen.

Reason No. 7: Making a big purchase while in escrow

Some home buyers make the mistake of opening new credit accounts while  they’re in the process of buying a house. But purchasing a  big-ticket item like a car or a boat while you’re buying a house can  jeopardize  your financing. Why? Because your mortgage lender’s underwriter is  going to re-evaluate your finances and recheck your  credit report shortly before closing in order to determine that you’re  still able to  qualify for the loan.

“Even buying a  fridge can  throw off your credit or debt-to-income ratio,” says Conway.   Translation: Don’t make any big purchases until after  you close on the house.

Reason No. 8: Not budgeting for closing costs

If you don’t have enough cash to cover closing costs,  you won’t make it  to settlement; and if that’s the case, you could lose  your earnest  money deposit. Thus, make sure to get an estimate from  your mortgage  lender of what your closing costs will be before making an offer on a property (currently, this is legally required—just make sure to read it).

Closing   costs vary widely by location, but they typically total 2% to 7% of  the  home’s purchase price. So on a $250,000 home, your closing costs  could  come to $5,000 to $17,500. Both buyers and sellers usually pitch  in on  closing costs, but buyers shoulder the lion’s share of the load  (3% to  4% of the home’s price) compared with sellers (1% to 3%), so you  need to make sure you have enough cash on hand to pay your portion.

Please consider The Myers Team your resource for all things real estate.  We have over 30 years of real estate experience, specializing in the Montgomery County area.  If you are refinancing, want a recommendation,  need a service provider or just have a home related question, please give me a call at  301-910-9910 or email me at bobmyersteam@gmail.com.
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