When begin talking to lender about getting preapproved, you’re going to go through tons of emotions including the ultimate deciding factor whether you should buy a home or stay put. Here are the following things to avoid falling prey to prior to closing escrow on your house.
Don’t get wrapped around the purchase price of the property. The purchase price of the house is a crucial factor, but it is not the main factor. The main factor when you buy a house should be the mortgage payment. The payment is the driver of long term affordability. In most cases for every $10,000 in purchase price that will only change your mortgage payment about $100 a month which could be offset by potentially paying off a credit card with a $100 minimum payment anyway
Deciding that you need to increase your credit score after you get your pre-approved. Once you get pre-approved for a house your lender should be able to give you advice about what it would take to increase your borrowing power or lower your monthly payment. One of the biggest misconceptions in a rising rate environment is to try to increase your credit score to get a lower interest rate when the market is working adversely. Purchase the house and your credit score go up anyway even if you do nothing else and you can always refinance in the future when rates drop.
Creating expectations for yourself there are far above and beyond anything that the market would support. So, for example in Sonoma County, California it’s not realistic to purchase a $500,000 house on 3 acres of land for a 10-year-old house that’s a four-bedroom three bath at 2700 square feet. What might be more reflective of the market is a 3-bedroom 2-bath house potentially that could be around 1800 square feet. Talk to your real estate agent.
Not accepting the fact that the house that you purchase might be the Catalyst or a stepping stone to a future opportunity. Whether this is a first home or move up home or even a second or third home no matter what stage in the house process you are and what property this is or how many homes you’ve owned before in the past recognize that the house that you’re buying could be a stepping stone no matter where you are in life to getting you into a bigger better more fancy or more desirable property or location. A home and mortgage are also a tax deduction and a forced savings plan, but it also can be a very viable financial vehicle to propel you into a new opportunity in the future. Classic example is a home buyer deciding they will not accept buying a condominium because they have their heart set on a single-family house however a condominium purchase can very easily be a healthy stepping stone and after two years in a condominium the equity one would have gained over that 24-month course of time as well as the credit score improvements could absolutely propel them into a single-family home purchase in the future.
Automatically self-diagnosing yourself that you can’t get a mortgage. Remember not all mortgage banks and companies look at mortgages the same way. In most situations the cheaper the interest rates the cheaper the lender the more the day are on to the next client because they are working so thin when they don’t have the bandwidth to give your file the time energy and due diligence that it otherwise may need. Just because a bank can do your loan does not mean that they have the desire to do your loan. What soon follows could be a lack of communication, lack of return phone calls for example, going dark, file taking longer etc. believe it or not it still happens. Work with a lender who can push the envelope as far as possible to get you into an affordable home. The measure of them should also be phenomenal communication, responsiveness and competitive rates.
Planning to buy a home in the future? Begin with a no-cost quote now.
