When it comes to buying a home, there are plenty of mistakes you can make in that process. Whether it’s not checking credit scores before being pre-approved, or not reviewing all of the upfront and closing costs, these can all cost you extra money or cost you the home in the process. We will go over the most common mistakes that buyers, new and old, make while in the process of buying a house.
- 1 Minute | No Hard Credit Check
Not Checking Your Credit Before Pre-Approval
One of the biggest mistakes you can make is to not double check your credit before trying to purchase a home. Since mortgage lenders can deny or approve your loan based on your credit worthiness, it is very important as a borrower to make sure you get a copy of your credit reports from the three main credit bureaus. Please be sure to check your credit for errors before even contacting a real estate agent.
You are allowed to get a copy from each credit bureau once a year, so it’s a good practice to make sure you do that so you can catch things that you would want to dispute. Before you put an offer on a home, you want to make sure that your credit cards are not reporting any late payments and that you do not have any outstanding collections that you do not know about. These items can make a lender feel like you are too high of a risk, even if these items are actually mistakes.
If you find any credit issues that you do not recognize, be sure to handle all of those disputes prior to beginning the home buying process. If you dispute a credit issue during the process, you can possibly put a delay on the purchase of your home until that dispute is resolved.
Credit disputes can take upwards of 30 days from when they receive your dispute, and can take even longer, up to 45 days. Because of this, it is generally not recommended to dispute any credit items during your mortgage lending process. However, there are definitely exceptions to this rule. Your loan officer will go over your options with you if this is a situation that comes up during the process and advise you on which route is the best to take. Often times, getting into contact with the seller and explaining that the home buying process will take a bit longer can save the home from being put on the market. However, there are times where the seller can be impatient as well and need to re-list the home.
Being Caught By Surprise With Upfront Costs
There are quite a few items that you as the borrower will be required to have in the beginning of the process. While you may have your eyes fixated on your dream home that matches your price range, keep in mind that there are actual fees during the home buying process as well.
The Earnest Money Deposit
The Earnest Money Deposit is one of the earliest up front costs that you will need to be responsible for. The Earnest Money Deposit is a good faith deposit that is given to the seller to show that the buyer is serious about purchasing the home. The Earnest Money Deposit can be anywhere between $250 and $2000 or more, depending on the agreement on the purchase contract.
The Earnest Money Deposit can be returned to the buyer if the home is not purchased through no fault of the borrower. If you were to start the home buying process and then change your mind that you do not want the home, there is a real possibility you can lose that Earnest Money Deposit.
- 1 Minute | No Hard Credit Check
Appraisal Costs
Another item that needs to be paid for by you is the appraisal. The appraisal report is a report that is created by an appraiser who visits the home to determine whether a home is safe to purchase and to also determine the value of the home. An appraisal can cost around $450, provided there aren’t any additional reports that are needed.
Depending on the loan program, repairs to the home may be needed in order for the lender to approve the loan. In this case, a completion report will need to be ordered and can cost an additional $150. Depending on your Earnest Money Deposit, you can already be responsible for around $1000 to $2500 before submitting your file to the underwriter.
Please be sure to check out part 2 of this series! Learn about more common mistakes that buyers make before buying a home. This can give you an idea on whether or not you’re ready to buy your dream home!
