10 rookie home buyer mistakes to avoid
February 21, 2010 · Tagged with Real Estate
It was supposed to be a momentous occasion for Brian, who was about to close on his first home. But after signing a thick stack of documents–and taking part in the ceremonious passing of the keys–something felt off for the then 26-year-old Montgomery County, Md., resident. There wasn’t even a chilled bottle of bubbly or a housewarming gift to punctuate this pivotal moment. “My Realtor told me that I can take him out for a steak,” recalls Brian, who prefers that only his first name be used to guard his privacy. “He made me feel like I owe him something, when he just got paid a $12,000 commission. It felt like a kick in the face.”
A year and a half later, Brian is dishing out thousands of dollars to replace a badly splintered deck, a tired heating, ventilating, and air conditioning system, and a broken window the home inspector–chosen by the real estate broker–didn’t catch. He recalls a handful of instances in which his real estate agent should have been more active as they toured the 16-year-old town home that Brian ended up purchasing, including pointing out his end unit’s cozy proximity to the busy street. “Now I can’t sleep past 7 a.m. because I wake up to the sound of rush hour,” Brian says.
With the extension and expansion of the popular first-time home buyer tax credit, which President Obama signed into law in November, as well as price declines and attractive mortgage rates, an influx of qualified first-time buyers are rushing to take advantage of the market. Mark Zandi, the chief economist at Moody’s Economy.com, projects there will be 1.84 million home sales to first-time home buyers in 2010, compared with 1.73 million in 2009. If you’re a property virgin about to take the plunge, here are some common blunders to avoid–and helpful tips that could mean the difference between financial security and a mountain of debt:
1. Not checking your credit report and score
You’ve clicked through hundreds of online listings, compared floor plans and square footage, and are eager to jump-start your search. But before you even think of setting foot in an open house, make sure you get a copy of your credit report. The cleaner your credit report and the higher your credit score, the more likely you are to be preapproved for a mortgage at a low interest rate. According to Keith Gumbinger of HSH.com, most home buyers will need a credit score of about 720 to obtain the most favorable mortgage rates.
Review your credit report a few months before you begin your house hunt, and you’ll have time to ensure the facts are correct and dispute mistakes before a mortgage lender checks your credit. You can access a free copy of your credit report at annualcreditreport.com once every 12 months.
2. Not getting preapproved
After you’ve assessed your credit report, it’s time to establish with a qualified lender how much you can afford. “First-time home buyers need to take the time to get an approval from their lender before looking at homes,” advises Ray Boss Jr., a six-year licensed Realtor with RE/MAX Realty Group in Maryland. “This includes getting a credit check and giving their lender a copy of W-2s, pay stubs, and bank and brokerage statements.” Getting preapproved can help you save time by looking for homes that you know you can afford instead of lusting after something out of your price range. And it will put you in a better position over another bidder with no preapproval.