We are jumping right into Part 2 of the Mistakes to Avoid When Buying A Home Series. We’ve touched into credit scores and credit reports, and some upfront costs that most borrowers can be surprised by. For this update, we will be talking about employment, closing costs, home inspections, and items dealing with other common mistakes. If you did not get a chance to read Part 1, please click here!
- 1 Minute | No Hard Credit Check
Quitting Or Changing A Job While Trying To Buy A House
During the process of purchasing a home, the underwriter will need to see that the borrower has a stable income and will be able to afford the mortgage payments. If the borrower gets pre-approved with a certain income and then changes jobs to a different income, that pre-approval becomes null and void. However, if this happens during the actual loan process, the underwriter will need proof that the income will be similar or more (depending on the loan program) than what was used to qualify with.
The borrower can stand to lose a lot from this decision. If the income is too low, the mortgage lender’s underwriter can outright deny the application. If the borrower quit their job by choice, then they also risk losing all of the earnest money deposit as well as not being refunded for the appraisal report. Everything they’ve paid for up to this point will be as if that money was flushed down the toilet
Thinking A Home Inspection Is the Same Thing As An Appraisal Report
When you place an offer on a home and contact a real estate agent, it’s highly advised that you get a home inspection. Keep in mind that a home inspection is not the same thing as an appraisal. A home inspection is a very in depth inspection of the home and it’s foundation to determine if there are any real possible issues.
An appraisal report is a report that determines the value of a home. An appraiser is not a licensed home inspector. This means the appraiser may or may not find major items that are in dire need of repair while determining the value of a home. A home inspector’s job is to find all items in need of repair or replacement and to advise the borrower about them in their report.
While a Home Inspection isn’t free, getting one can mean the difference between backing out of a money pit or being stuck with having to pay for all the repairs.
Not Knowing How Much House You Can Afford
Home prices on the market can fluctuate along with interest rates and property taxes for any given year. The price range of your dream home may actually be in reach if you determine just how much house you can afford. You can give yourself a rough idea of how much monthly payments can be with a handy mortgage calculator. Just keep in mind that the interest rates, the loan program chosen, and other factors may lead into your mortgage payment fluctuating.
Upon finding a good mortgage calculator, you can add all of the additional monthly payments you’d have to make to give yourself a good figure. As mentioned before, this can fluctuate based on credit card payments, whether you have a fixed or variable interest rate, and also whether or not your home has a homeowners association fee.
While the underwriter will ultimately determine whether or not he or she believes you can afford you home, there are additional costs that can happen after the loan closes. Any costly repairs will need to be paid for by you, as the new homeowner. If you’re used to renting, this can be a shocking new cost.
- 1 Minute | No Hard Credit Check
Buying A Home Too Soon
While the prospect of home ownership is like a dream come true, it’s also a very expensive and delicate process. Depending on the loan program, you may be trying to bring enough money as a down payment to avoid mortgage insurance. Having to pay for private mortgage insurance is an added expense that you could do without.
Keep in mind that you should also save enough to make sure you can cover the closing costs, which is usually a percentage of the cost of the home. Sometimes taking a few months to get your finances in order can help make sure you get through the process and also aren’t paying for your mistakes for the entire term of the mortgage loan as well.
