Let’s say that you have planned, saved, researched—all done in the quest for the perfect home. Then, you find the dream home! What if something goes wrong? Unfortunately, no matter how careful you are—some deal killers are avoidable. Here are the preventable ways to insure a smooth purchase.
Don’t make big purchases for the new home
A common reason for a real estate deal to fall apart is that many homebuyers do not fully understand the mortgage process. You may get a loan pre-approval, but what you really need to do is follow the directions of your lender.
The lender will start your file, give you a list of paperwork required, order an appraisal and credit reports, verify your employment and income, and more.
Next, your file is sent to the processor. In this stage of a mortgage approval, the processor will review all of your information as well as the appraisal. Then, they will then put together a package of all pertinent information to be sent to the loan underwriter.
The underwriter is the person who determines whether or not you are an acceptable credit risk. They will assess your ability to repay the loan, examine your credit, and the collateral used to secure the mortgage. Then, just before funding the loan, the underwriter will perform what is known as a "soft pull" of your credit information to see if anything has changed
This is the potential problem time. If you hope to keep your purchase alive, don't do anything—from application to closing—that might change your financial picture and sabotage your final approval. Do NOT shop on credit for appliances, furniture or anything else. Don't switch jobs, fall behind on your bills, co-sign a loan for anyone, or in any way reduce the income stated on your application!
Read Homeowners Association Documents Carefully
When you purchase a home in a community governed by a homeowners association (HOA). The agreement will be a mountain of paperwork to read and approve. There may be deal killers included in the fine print, so be sure to read these documents carefully or better yet, have your attorney review them.
While HOA problems could potentially derail the deal for you, it's better to have it happen upfront rather than when you're further along in the process.
Home Inspection Problems
All homes—even newly constructed ones—may have problems. This can set you up for a failed real estate deal. Keep your expectations realistic. Set your sites on finding a home that has small, easy-to-fix problems, and don't worry if some are worse than others. When considering making an offer and negotiating, don’t sweat the loose doorknob but negotiate when it comes to water damage or worse.
The real estate industry does remind homebuyers that they'll need a down payment—typically from 3 to 20 percent of the total loan amount when they purchase a home. Add onto this amount the money you will be required to pay before the house is yours (closing costs). This is most likely because closing costs are a little harder to pin down. They vary wildly and depend on the type of loan, the amount of the down payment, and a lot of other factors.
Unfortunately, this lack of information can cause real estate deals to disintegrate. To avoid this particular problem, pay attention to all communications from your lender and make sure to keep some money in reserve.
When you receive your loan estimate from the lender pay close attention to the "Calculating Cash to Close" section. This section is an estimated cost to close the loan. This is an estimate and the amount may go higher or lower. Speak with the lender if you find any options here, especially if it will be impossible for you to come up with the money. Just before closing you will receive the "Closing Disclosure," which is quite similar to the estimate, but these figures are final.
For the most part, real estate deals usually conclude successfully. Always use an experienced agent. For a smooth, low-stress real estate transaction, slow down, pay attention to the small details and keep your expectations realistic. Finally follow the advice of your real estate agent or attorney.