We hear this sentence every day and I cringe every time. Today’s market is competitive and homes are selling quickly. The seller is not going to wait for you to get your financing lined up. You should meet with a lender and get pre-qualified or pre-approved before you start your search. That is the only way you can be ready to make an offer when you fall in love with a home.
“I am sure I won’t have any problem getting a loan. I just want to find the right house first.” We hear this sentence every day and I cringe every time. Today’s market is competitive and homes are selling quickly. The seller is not going to wait for you to get your financing lined up. You should meet with a lender and get pre-qualified or pre-approved before you start your search. That is the only way you can be ready to make an offer when you fall in love with a home.
When shopping for a lender, make sure you ask for recommendations. Your real estate agent and friends or family who have recently purchased are great resources. Don’t be afraid to ask questions! Were they able to the loans they took? Did they close on time? Were there unexpected costs? Did they stay in touch during the process? This is one of the largest purchases you will make and involves a great deal of your hard earned money. Make sure who you choose to handle the financing is trustworthy.
It is tempting to “just want to take a look” at that home that is $25,000 outside your price range. In such a competitive market, this just sets you up for frustration. If you love the house, you can’t make an offer that is close to asking price so it will be difficult to compete with other buyers.
You may think it can’t hurt to try a lowball offer…just to see if the seller will accept. Don’t assume the seller will counter offer. In a seller’s market, it is not unusual for a home to sell at or above the asking price. There could be other buyers making offers at the same time. One of those offers could be better than yours. You may not get a second chance to offer. Your real estate agent can be a huge help in the negotiation process. They can compare the home you are interested in to other homes that have sold to give you the best chance at winning your bid without overpaying.
Once you set up your financing for a home purchase, don’t open any new accounts, don’t make any big purchases on credit, don’t withdraw large amount of money, don’t change or quit your job. In short, don’t do anything to change your finances. Your lender will re-check your credit prior to closing and if your credit score or debt-to-income ratio has changed, the lender may not be able to close your loan. It might be tempting to go buy new living room furniture, but just wait until after closing.
BONUS: HERE IS AN EXTRA MISTAKE TO AVOID WHEN BUYING YOUR HOME
While there are great financing options out there, almost all loans require that the buyer pay some closing costs. Your lender should be giving you an estimate of what your out of pocket costs to close should be. Make sure you talk to the lender about how much those costs could be and make sure you plan to have that available for closing day. You could also have other expenses outside of closing such as inspection costs. Your real estate agent can help you plan for those expenses.