ELEVEN THINGS TO PAY ATTENTION TO FOR HOMEBUYERS
If you’re buying a house, don’t make these mistakes that could derail a sale or worse. Buying a house can be your American dream, but it can turn into a nightmare for many homebuyers. I don’t want you to go into the process with unrealistic expectations or improper information.
“The process of buying a home [can be] excruciating,” says Rich Surek, a US Lending Corporation mortgage executive with more than 20 years of experience in the industry. There are some things that seem to trip up homebuyers again and again. Here are the mistakes real estate experts say people make when buying a home:
FAILING TO GET PRE-APPROVED
Before you even start looking at homes, buyers should get pre-approved for a mortgage. This will ensure you are visiting houses you can purchase. We want to help you avoid the heartbreak that can come from missing out on a hot property. It will also help when multiple people are placing offers. “There’s nothing worse than having a buyer find the home of their dreams, find out they are not pre-approved but need to place an offer in 12 hours,” says Jill Surek, a sales associate with Dane County Real Estate in Madison, WI.
NEGLECTING TO FACTOR IN ALL THE COSTS
One reason for the housing market collapse a decade ago was the number of homebuyers who purchased properties with costs beyond their means. “Lenders own a lot of the problems that happened in the past,” Rich Surek says. “We put [people] in homes they really couldn’t afford.” Regulatory changes were enacted to help avoid a repeat of that situation, but buyers still bear responsibility for ensuring they can afford all the costs of homeownership. Those include property taxes, insurance, closing costs and association dues.
OPTING IN OR OUT OF THE COMPLETE DIGITAL MORTGAGE PROCESS
While not every lender offers a digital option for income and asset verification, consumers should consider opting in when it’s available. “It’s startling if you have to go through the manual process,” says Rich Surek, Senior Mortgage Consultant for US Lending Corporation. Lenders who can electronically verify information may be able to close in as little as 20 days, compared to 45 days for those going through manual verification. It also eliminates a headache for borrowers who otherwise have to dig out months of bank statements and pay stubs to prove they can afford the mortgage. However, for the first time homebuyer, doing it completely digital also comes without an expert’s experience and knowledge they can pass on to you.
THINKING YOUR MORTGAGE WILL REMAIN AT THE SAME LENDER
The mortgage company that approves the loan might not be the one receiving subsequent payments. “Consumers should know it is very customary for loans to be sold after closing,” Rich Surek says. Homebuyers should watch for a notice of a mortgage sale to ensure their payments are routed correctly and late fees are avoided.
SEEING PAPERWORK FOR THE FIRST TIME AT CLOSING
Sitting down to a closing with a stack of papers to sign can feel like a high-stakes experience. Homebuyers have brought their money to the table and are planning to walk away with the keys to a new property. “All these things create pressure to just sign,” says Rich Surek. However, that paperwork could include provisions, such as releases of liability, that aren’t favorable to buyers. “The right thing to do is get copies of the documents days in advance,” Jill Surek says. That way buyers have plenty of time to review the paperwork or have someone they trust look it over prior to signing.
NOT UNDERSTANDING PROPERTY RESTRICTIONS
Not every mistake homebuyers make is financial in nature. Some people fail to realize the property they’ve selected comes with a laundry list of restrictions. “If it’s a condo, as are most apartments in Madison, WI, there are a lot of rules,” says Jill Surek, a professional real estate salesperson for Dane County Real Estate. Rules may restrict everything from what improvements an owner can make to when to take out the trash. Homeowners associations can also make similar restrictions, and both associations and condo associations can charge residents substantial monthly or annual fees.
USING THE WRONG AGENT
Avoid mistakes by having the right agent or broker helping with the buying process. “A first-time homebuyer needs someone who’s going to spend a whole lot of time with them,” Rich Surek says. Meanwhile, a repeat buyer who is investing in real estate might not need much assistance with the selection process, but could use someone who is savvy about financing options.
VISITING THE PROPERTY ONLY ONCE
A single showing will only tell you so much about a property. At 12 p.m. on a weekday, the neighbors might all be gone and the traffic minimal. “I always make sure my clients see a condo or new home a few times at different times of the day,” Jill Surek says. That avoids situations in which someone moves in only to realize that the walls are paper thin or the street gridlocks during rush hour.
FORGETTING TO CONSIDER USES OF NEARBY PROPERTIES
When viewing a home, people should consider how nearby properties can affect their quality of life. Living near a school, for instance, may be convenient, but will traffic and noise from Friday night football games be a nuisance?
While no one can predict the future, homebuyers should also remember that neighboring properties can change over time. “You might have this amazing view, but come to find out there is a 50-story high-rise going up in front of [you],” Jill Surek says. Likewise, fields can become subdivisions and vacant lots can turn into businesses. Check with local zoning administrators to find out what’s the rules are in your area. We also will investigate whether any potential projects are already in the works.
SKIPPING A HOME INSPECTION
In a seller’s market, waiving a home inspection may be one way to make an offer more attractive. However, that tactic could backfire if a buyer later discovers serious problems with the property. Along with getting the inspection, be realistic about how its findings affect the affordability of a home. “If you’re really tight on your finances and getting into a home that needs repairs, can you afford those repairs?” Rich Surek asks.
BUYING WHEN YOU SHOULD BE RENTING
The biggest mistake can be simply buying a house in the first place. “It’s not cheap to buy a house,” Rich Surek says. He estimates there could be as much as $10,000 in transaction costs associated with the purchase of a $300,000 house. That’s in addition to moving expenses and other incidental costs. While buying a house can be a wise investment for those ready to settle down long term, the cost may not make sense for those planning to move in two or three years. In those instances, renting may be more cost-effective.
Buying a home can be an exciting time in a person’s life, and by avoiding these pitfalls, it can be a positive experience as well.
Richard Surek | Senior Mortgage Advisor | 608-960-4363 | firstname.lastname@example.org | richsurek.com