When looking for a home to buy, the stakes are high and the to-do list is long. Mistakes could cost you thousands of dollars. Is there also a not-to-do list of things to avoid if you want this process to go smoothly? Here are seven tips about what prospective homeowners should NOT do when searching for their next home. Some of my colleagues at Long and Foster weigh in:
Don’t wait for the next season or for the market to change before you start the process, said Ron Wivagg, national sales support manager for Prosperity Home Mortgage, LLC, a Long & Foster subsidiary. “Mortgage rates may rise, so the biggest mistake could be waiting too long,” Wivagg said. The home you want and can afford today could become too expensive with just a slight increase in the mortgage interest rate.
Don’t jump into the search without mortgage pre-approval. Getting pre-approved for a home loan helps you know which homes are in your price range, and it prepares you to move more quickly on the place you want to buy, Wivagg said. In addition, understand the difference between a pre-approval versus a pre-qualification letter from your loan officer. A pre-approval is reviewed by an underwriter and can give you an advantage over a buyer with a pre-qualification letter in the eyes of a seller. Prosperity calls this its Buyer Advantage program, and it is offered as a complimentary service by all the company’s mortgage consultants.
Don’t make any big financial moves during your home search. Even if the bank already said yes, the days and weeks prior to closing aren’t the time to change jobs or make a big purchase on credit (like furniture or a car). Lenders are looking at your financial stability right up to the day the deal is closed.
Don’t go over your budget, said Walter Key, a Long & Foster agent in Charlottesville, Virginia. A bank’s prequalification might not consider your personal spending habits and the additional costs of owning a home, such as homeowner’s association dues and maintenance. You could lose some of the satisfaction of homeownership if you have to give up other things you enjoy to be able to afford your house.
Don’t wait for the perfect house to come along with every feature you’ve ever dreamed of, Key added. “It doesn’t exist,” he said. “I’ve seen buyers become exhausted or discouraged. You may find an amazing opportunity awaits you if you’re willing to see the value in a house that doesn’t have all the things you want right now, but perhaps you could add them in the future.”
Don’t expect too much from the seller, said Julia Hufford, a Long & Foster agent based in Alexandria, Virginia. “I can negotiate with the best of them, and I go to bat for my clients,” Hufford said. “I also want to make sure we’re fair, and not lowballing to a point where it’s not going to help my client’s situation.”
Don’t forget about investment potential. Hufford said she often asks her clients to look at a home not only as a place to live, but potentially as a future financial vehicle, to rent out or sell at a profit when they’re ready to move up. That could mean going for homes that aren’t at the top of the price range, to leave room for touches that add equity. Another goal might be to keep the mortgage payment below the level at which someone might rent it later. “I ask them to think about what’s on the horizon, and how their property will play into that,” Hufford said.