Not getting pre-approved before home shopping
If I had to narrow this
list down to just one mistake, this would be it!
I can't tell you how often I am contacted by a
potential buyer who wants to look at homes, yet they
have no idea if they are even qualified to purchase.
This is the classic case of the "cart before the
horse". If you haven't been pre-approved, you're home shopping in the dark
flashlight. You may be looking in a price range that
you cannot afford. Worse, you may be able to afford
much more than you think!
factor is that you should not make an offer on a home
without also submitting a pre-approval letter. The
reason for this is that few listing agents will risk
taking their listing off of the market unless they are
convinced that you are fully qualified to make the
purchase. For this reason, they usually request that a
pre-approval letter is submitted with your offer. If
you don't include one, your offer will most likely be rejected.
My advice: Contact a lender right away and get pre-approved
before shopping for homes!
I can recommend a
mortgage specialist who will help you determine your
purchasing power and who will help you with a loan
when you find the right home. Once you are
pre-approved, the lender will provide you with a
letter that can be submitted with the purchase
offer. You can apply for an FHA loan with
3.5% down, VA loan with zero down, or conventional
with 5%, 10%, 20% or more down payment. There are
many financing options!
Many buyers are
shopping for the right house, but in the wrong price
category. For example, a buyer may ask me to find an
upgraded, 4 bedroom, detached home for under
when in reality, detached homes in the city
typically start at $600,000 for a 'fixer".
This miss-match occurs when a buyer hopes some great
deal will just fall out of the sky, or they have
decided on a certain level of home but have no idea of
what it will realistically cost.
My advice: Simple - Change your criteria or your price!
Perhaps one less
bedroom would do, or look in another city or area
where home prices are a bit lower. Consider a town
home instead of a detached. Maybe you can live with a
2-car garage instead of a 3. At worst case, just wait
until you can afford the home you are really looking
for. In any case stop trying to find something that
can't be found at that price!
3. Being too specific in your search
- Always finding fault or being too picky
The fact is that for
the average homebuyer, there are probably dozens of
homes for sale that would be suitable for them. Some buyers
though, have an "ideal" home in mind, right down to
the shape of the pool, the color of the walls, and the length of the driveway. For this
buyer, no home will do! Every home we see has flaws
so we have to keep looking for that perfect place.
My advice: Understand your true
needs and be more flexible!
Realize that you may
never find your perfect home (unless you win the
lottery!). The most important things are finding a
good neighborhood, a workable floor plan, a good
location, and adequate space (square feet, number of
bedrooms, etc) You can always add granite counter tops
and stainless steel appliances. You may find great
homes in the city next to where you thought you
wanted to be. The other school district just
might be fine after all. And hey, you can always add a
few tall trees to block that neighbor's view of your
too low a price, or "low balling"
Many buyers feel that
they have to get a deal (ironically, these are often
the same people who want "top dollar" for
their home when it's for sale!) It's true that it is
sometimes appropriate to offer a lower price on a
home. Many equity sellers pad their sales price in
anticipation of a lower offer. Fixer homes
(homes in need of a great deal of work) should always
be ripe for a bargain deal. A home that has languished
for many weeks on the market may welcome a low offer.
Also, buying during the fall/winter holidays is a
good idea. There are less buyers in the market
during this time, so less competition.
Bank owned (or REO) homes are typically
priced to sell. While the lender may negotiate, expect to pay reasonably close to list in
many cases. Short sales are another matter.
Buyers are very often surprised to find out that a
short sale home sold for higher than list price. While
buyers have been programmed to offer less than list
price, a short sale price should in many case be
thought of as an "auction opening bid price"
(read more about it, here).
There are also "hot" properties; new home listings that are very desirable for the
price. Bidding low on these is futile, as there is
sure to be lots of competition. One way to judge this
is to note the number of real estate business cards at
the premises. If there are a large number of business
cards on the table and the listing is relatively new,
the property is "hot" - Expect competition!
My advice: Check
recent sales comparables and be prepared to pay a fair
You may certainly offer
a low price, but follow that with realistic
expectations about actually getting the home. You may
have to compete with other buyers for many homes. The
seller will inevitably go with the "highest and
best offer", so keep that in mind. Also, always
put yourself in the place of the seller. If this was
your home, would you part with it for 10% below
list? I will be happy to provide you with a list
of recent, comparable sales. This will give you a
benchmark on which to base your offering price.
in making an offer - Believing that the home will
still be there tomorrow, or feeling you need to look
I don't think anything
is more frustrating and disappointing for a buyer than
finally deciding to put an offer on home, only to
find out that it just went into escrow. I have been with many buyers who find a
great home, but then hesitate on making the offer. When the decision is finally
made, we often find
out that the home is gone! Also, many buyers feel
they need to be in the market looking for homes for
many weeks, even if they had found the perfect home on
the first day of looking! The justification is
usually, "I want to see everything that is out
My advice: If
you find the right home, make an offer
right away so that you lock it down and beat any
If you make an offer you
can always withdraw it if you change your mind, plus
you usually have 17 days or more to investigate the
home at no risk to your deposit (as long as you have
not removed contingences). Whether we are in a "buyer's market"
or not, please do not fall under the impression that all of the homes for
sale will just sit there and that you can take your time to make a decision. While this is true with some
homes, it often is not. Think about it this way: You
(the buyer) obviously chose to see a certain home
because it desirable and that it fit one or more of
your criteria. Do you think other buyers might not
come to the same conclusion? If you did your research
and found a great home on the first day you looked,
don't believe it will still be there in a few
If it's right, get it now before someone else does!
afraid to "pull the trigger"
buyer is afraid to go ahead with an offer out of fear
-- fear that the market will continue to drop, fear
that they are making the right decision, or just fear
of the responsibility of being a homeowner.
advice: There's no reason to be terrified of
buying a home!
really want to be a renter for the rest of your life?
Buying a home is a good thing! The market may indeed
rise or fall, but if you are planning to be in the
home for many years you will probably be fine. The
fact is that no one really knows where the market will
be several months into the future, or whether we will
have higher or lower home prices, mortgage interest
rates, or home inventory. At the end of the day, if
you still find that you are worried about the housing
market dropping more, then don't buy now -- stay put and
try to time the market. Buying a home is a big
decision and no one should lose any sleep over it. You
can always choose your time to buy in the future.
Trying to buy a home with little or no down payment.
Apologies for being blunt, but it takes
some cash to be a home owner! Many buyers call me
looking for a loan take-over, a lease-option,
zero-down, or some type of distress sale, in the hopes
that they can get into home ownership without having
any cash. Unfortunately, the lending world has changed
dramatically and most of these options will not work.
You will almost always need
some percentage of down payment money in order to
qualify for a home loan.
Loan take-overs are a thing
of the past -- Few homeowners have assumable
require between 1 and 5% of the purchase price as
an option deposit (more about that, here)
Zero-down loans went
"bye-bye" with the sub-prime loan crisis
Sellers offering "owner
financing" are usually just giving you a
better interest rate. They still want a 10% or 20%
One question I'm often asked
is: "We have no cash for a down payment,
but do I know any home owners who are desperate to
sell and would be happy to have us move in and take
over their mortgage?". We used to see
"creative financing" techniques like
wrap-around loans, or A.I.T.D.s (All Inclusive Trust
Deeds). These techniques are lender fraud and cannot
be done legitimately, as they are in violation of the
seller's mortgage agreement.
My advice: Unfortunately, you
will need some cash to buy a home!
You may qualify for an FHA loan
with only 3.5 % down. There are also a few low-income
down payment assistance programs (e.g.., Orange County
MAPS program). You may be able to have a relative or
friend "gift" a down payment for you.
Regardless, you will have to have money for closing
costs, home owners insurance, loan fees, etc. I can
help you contact a mortgage specialist who will check
on your qualifications for a low down payment loan, or
down payment assistance. Bottom line though, is that
if you have nothing in the bank, don't shop for a
home. Instead, lease a home, save money, and buy
later when you have accumulated enough cash for a
reasonable down payment and expenses.
that you've read this article, how can YOU avoid buyer
me at 949-290-3263 or at firstname.lastname@example.org.
I will be happy to help you formulate a plan to
achieve your home buying goals. We will also avoid
many of the mistakes and pitfalls that can effect
other buyers. I have several
lenders who can get you pre-approved quickly. I
will go through your requirements and search for
homes that meet your needs. Finally, I will work
closely with you to determine the correct price
category and lowest offer price so that we can
avoid losing your dream home to another