A few thoughts for a prospective Buyer: whether you’re a first-time home buyer or on your second or third home, it’s not always easy to make the best financial decisions. Here are some common mistakes we find among buyers:
BUYING MORE HOME THAN YOU CAN AFFORD- While the bank may qualify you for a generous mortgage amount, it’s not necessarily a good idea to take the whole amount. Don’t forget, the mortgage is still only one part of your monthly expenses. A good rule of thumb I recommend is to use as a base your current housing cost (rent or mortgage) and assess how easy or difficult it is to pay this amount every month.
NOT SETTING ASIDE MONEY FOR CLOSING COSTS – Buyers often get sticker shock at the closing table if their agent hasn’t outlined all the checks they will be writing. A Buyer needs a net sheet of the cost prior to engaging in the process.
CHANGING JOBS DURING THE LOAN PROCESS – or deciding to become self-employed during this period – Lenders want to see a two-year work history.
NEGLECTING TO KEEP A PAPER TRAIL FOR CASH GIFTS – Using a cash gift or windfall for part of your down payment requires a paper trail – a gift letter from Mom and Dad or other source -- and a bank statement showing where you deposited it.
APPLYING FOR OTHER NEW CREDIT DURING THE APPLICATION PROCESS – Banks are looking at your debt-to-income ratio when deciding on your loan approval. Something as simple as getting an additional credit card will reduce your credit score and throw the process out of whack.