Hiring The Wrong Real Estate Agent, And 9 Other Mistakes First-Time Homebuyers MakeBy Erin Kelly Studies show that only majorly depressing life events -- think death of a family member, losing a job or getting a divorce -- outweigh the stressful demands of moving. Since an estimated 43 million Americans relocate each year, weve partnered with Quicken Loans to help makeBy Erin Kelly Studies show that only majorly depressing life events -- think death of a family member, losing a job or getting a divorce -- outweigh the stressful demands of moving. Since an estimated 43 million Americans relocate each year, weve partnered with Quicken Loans to help make your search for your first home a little bit easier. We give you the 10 mistakes people commonly make when starting their home search...and most importantly, how to avoid them.Youre actually nowhere near prepared Sure, you may love the idea of being a homeowner. But are you ready for all that responsibility? Larry Nelson, president and co-owner of Cornerstone Realty, says rookie home buyers often fail to identify and qualify for a source of down payment, start searching before theyre completely pre-approved for financing, and may have unrealistic expectations. Nelson suggests identifying clear housing goals at the beginning of your search, and researching desired neighborhoods to start off on the right foot. Nelson asks: “If you need a three-bedroom ranch and can qualify for $200,000, are there homes in areas you would live in for that price?”Youre skipping steps One of the most common errors Bay Area realtor Ed Milestone often sees is that potential buyers get so excited, they overlook important details -- even though its likely to be one of the biggest purchases theyll ever make. “When I first meet first-time home buyers, theyre usually so excited to get started that theyll skip steps,” Milestone says. He advises home buyers to talk to a lender before starting the process or contacting a realtor: “In order to submit for a property, you need a pre-approval letter,” he says. “Some people make assumptions about what they can afford, which can get them into trouble later on.” You underestimate the cost Another huge mistake Milestone witnesses among first-time buyers is underestimating just much how theyll have to pay. “Dont assume you can afford what you think you can afford,” he warns. “You can play with mortgage calculators online, but they dont know your credit or how much debt youre in.” Erin Lantz, VP of mortgages at Zillow, has seen many first-timers overlook budgeting in closing costs, which can run anywhere from 2-4 percent of the purchase price. “If a buyer has saved up enough for a 3.5 percent down Federal Housing Administration (FHA) loan, theyll need to essentially double the amount theyve saved to cover the closing cost,” she explains.Youre too quick to say, ‘Yes If youre not settling down for good, dont be so quick to agree to a fixed-rate loan. “First-time home buyers are often buying starter homes and plan to be in them for just a few years, so getting a 30-year fixed loan may not be the best choice,” says Lantz. He recommends looking for a lower monthly payment with an adjustable rate mortgage that is still locked at a fixed rate for five, seven or 10 years. That will carry new homeowners through until theyre likely to move. “There are tradeoffs, though,” Lantz warns. “If buyers think there is a chance theyll stay longer than 10 years, theyll likely be better off with a fixed-rate loan.”You dont ask for help One of the biggest mistakes new buyers make is believing they dont need a real estate agent, says Real Estate Expert and author of Next Generation Real Estate, Brendon DeSimone. “Some people, especially millennials, think they can go at it alone -- just like people have eliminated the travel agent. But a good agent who knows their market well and has seen the homes can really make a difference. They know what you dont know. You can only go at it so far by doing it yourself.”You lack a total financial plan Failing to have a complete financial plan is a major homebuyer faux-pas, Nelson warns: “Buying a first home involves more than substituting a mortgage payment for rent. All financial resources should be inventoried and compared to the demands that will be placed on those resources.” While lenders may approve an income debt ratio of 40 percent, its important to make sure you can actually afford that percentage of your income being used for the mortgage payment -- while saving for your future.You rely too much on the Internet Think you can buy a new home with a few Google searches and clicks? Think again. According to real estate SEO expert Dave Keys, 90 percent of all home searches begin online -- and “online” usually means Google. “Google is going to give them a syndicate website, like Zillow or Trulia,” Keys explains. “The mistake thats inherent in using those sites is that they give you the idea that you can simply go on the Internet and buy a house.” DeSimone cautions against this frequent mistake, too: “Dont take what you see online for face value. Go and see it in person.”You hire the wrong Real Estate Agent Buying a home is a big decision, so make sure you trust whos leading the process. “Talk to coworkers, friends and family to get [realtor] recommendations,” Nelson advises. When talking to prospective agents, its important to ask the right questions. Everything from, “Do you specialize in the areas that I am interested in?” to, “Do you really want to work with me?” are fair game. You dont educate yourself Above all, its important to educate yourself. “Its a huge purchase,” DeSimone says. “Do your research, check that research, then double-check and triple-check it. If your agent tells you one thing, ask for a second opinion.” As for a loan? “Always ask questions and make sure the numbers add up,” he says. “Be a smart shopper.”You underestimate the value of the appraisal How much a lender can lend depends on several guidelines, many of which depend on the value of the home, according to Ralph Linsangan, Director of Solution Consulting at Quicken Loans. If the home appraises for lower than the original purchase price, the amount a lender can provide may decrease based on that value. What to do in this situation? There are options to renegotiate with the seller, bring extra funds to close, change the loan structure, or find a different property if the other options did not work, Linsangan advises.Looking to buy? For more first-time homebuying tips, visit the Quicken Loans Learning Center. ift.tt/1gB4pon
Posted on: Tue, 16 Dec 2014 05:32:54 +0000
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