Here are five mistakes you must avoid as a first-time homebuyer.
As a first-time homebuyer, here are five mistakes you must avoid during the purchase process to ensure your transaction runs as smoothly as possible:
1. Not properly preparing your home insurance. Your lender will require you to get an adequate home insurance policy before closing on your loan. If you forget to secure one or your policy start date doesn’t align with your closing date, your transaction could get off schedule. In many cases, the home just isn’t insurable. This might happen if the previous owner made an insurance claim for some sort of high-risk condition, like mold or severe water damage. It also might happen if they have an open claim that hasn’t been closed yet. The best thing to do is stay ahead of these mishaps and look for home insurance as soon as you go under contract.
2. Not preparing for a low appraisal. Not many homeowners have a good understanding of appraisals. If your appraisal comes in lower than your offer, it could send things to the drawing board. You may have to pay the difference, renegotiate with the seller, or back out of the deal entirely if both parties can’t come to terms. Your lender won’t cover more than the appraised value.
Since homes in our area are appreciating quicker, low appraisals are happening more and more often. In certain cases, a low appraisal can benefit a homebuyer because it ensures they’re not paying more than what the house is worth. On the other hand, in this insane seller’s market where every home seems to be getting 20 offers, it might be worth it to pay above the home’s appraised value if you think it’s the right home for you. Sometimes offering $1,000 over the appraised value is enough to make your offer stand out and get accepted.
3. Lowering your credit before your lender closes the loan. Many lenders will recheck your credit just before closing on the loan, which can be a problem if you’ve already made a major purchase or applied for additional loans or credit cards. Fortunately, this is an easy mistake to avoid. Just keep a tight rein on your spending in the weeks leading up to the purchase and save big-ticket purchases (e.g., a new car) until after you close on your loan.
4. Making errors in your homebuyer loan documents. If you spot an issue in your final closing disclosure or your name is misspelled on your loan documents, your closing could be delayed and your lender would have to append the paperwork before it can be signed and notarized. That’s why it’s critical for you to review all documents you receive right away so if there are any errors, you can report them to your loan officer as soon as possible.
5. Having problematic walk-throughs. Before you close on your loan, you’ll have the opportunity to perform a final walk-through of the house to ensure any repairs you’ve requested have been done, the homeowner has cleared everything out, and that the home itself has been maintained and is in the same condition as it was when you made your offer. If that isn’t the scenario you walk into, you’ll have to work with your agent to resolve this issue. They may need to ask for additional credits at closing to cover any additional repairs or schedule a cleaning or trash removal if the house is in disarray. The best thing you can do is ensure your agent works closely with the listing agent so that all repairs have been made and there’s proof of that before the final walk-through.
You want your purchase to stay on track, so it’s important to be proactive leading up to closing. In addition to these tips, make sure you hire a great agent who can walk you through the home-buying process, answer all your questions, and make the purchase a great experience.
As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to us. We’re happy to help.