Buying your first home can and should be an enjoyable life experience.

One filled with pride and excitement as you set out to claim interest in a piece of American real estate to call your own. 

Unfortunately the home buying experience for many consumers is the exact opposite, resulting in added stress, unanticipated expenses, and in some cases a failed home purchase.

In general, there are three overall reasons for this:

• Lack of Home Buying Education and Preparation
• Selecting an Inexperienced or Unqualified Home-Buying Team
• Obtaining a False Pre-approval

To get you started, here are five common mistakes to avoid:

Mistake #1:  Failing to Build a Qualified Home Buying Team

In order to purchase a new home you will rely on the services provided by dozens of people – realtor, lender, attorney, title agent, inspector, appraiser and surveyor to name a few.

For this reason, selecting a team of knowledgeable and experienced professionals that have your best interest in mind is critical to your home buying success.

However, experience shows us that failing to build a qualified home buying team is one of the top five reasons for a difficult or unsuccessful home purchase.

The question then becomes:  Why are consumers skipping this important step in the process?

The Cause – too often consumers fall in love with a particular home, or the idea of homeownership, and jump directly into the home buying process. In other words, most of their “team building” takes place after they locate a home instead of prior to their home search.

The Result – building a home buying team “on the fly” tends to result in a poor selection of team members based more on cost and convenience then on qualifications and trust.  In the end, this method often leads to a costly and delayed closing.

The Solution – Take your time and select a home buying team that is right for you well before your home search.  This will allow you the time needed to research and interview potential home buying professionals.

Remember, not all realtors, lenders and real estate attorneys are the same.
Make sure you assemble a team that is right for you!!

Mistake #2: Blindly Following the Wrong Agent

Your real estate agent will become an important member of your home buying team. Besides being your connection to the available properties for sale, he or she will take the home buying journey with you and offer advice along the way.

If you avoided common mistake #1, you should be in good hands as you have carefully selected an agent that will work hard and in your best interest.

However, too often eager, inexperienced home buyers select an agent by circumstance. In other words, the real estate agent that represents them for their purchase is simply “any agent” they ran into while touring an open house or searching for properties online.

Avoid this common mistake by setting aside time at the start of your home buying journey to interview and select a real estate professional that is right for you.

Here are three key character traits you will want in your agent:

• Likability: Of course, you’ll want to select someone you like – after all, you may spend the next several months working with this person.  However, “likeability” is also a key character trait for your real estate agent to have.  Remember, he or she will be the one presenting your offer to the seller and the seller’s agent.  Having a real estate agent that comes across in a likeable, honest, and fair manner will go a long way compared to offers presented from agents that are less approachable.

• Experienced and Committed: While experience doesn’t necessarily equal success, having an experienced full-time agent by your side can prove to be very valuable, especially in a competitive home buying market.  Active, full-time agents tend to have a greater working knowledge of their local real estate markets, property values, …and may have insight to properties for sale before they even reach online listings.

That’s not to say a newer agent can’t do a great job. Many of the talented up-and-coming agents join successful established real estate teams, providing you access to the best around.  And since their client base is smaller, their attention to your purchase increases.

The key is commitment and availability.  Select an agent that you believe will commit their time and resources to helping you locate the right home.

• Negotiating Skills: Make no mistake about it, the buying and selling of real estate is a business transaction. And like all transactions that involve a buyer & seller, good negotiating skills can mean the difference between a purchase that gets to closing and one that falls apart. You’ll want an agent on your team that has fine-tuned this very important skill.

Our tip – Stay committed to your agent and let them know you appreciate their hard work. Top agents will have many buyers, just like you, looking in the same price range.  When an attractive well-priced home comes on the market, chances are they will call their most qualified and loyal clients first.  You want to be on the other end of that call!

Mistake #3: Obtaining a Loan Pre-approval

We know what you’re thinking, this must be a misprint.  Nearly everyone has advised you to obtain a loan pre-approval from a lender before bidding on a home.  How then can it make this list of common mistakes?

While we love the idea of having a lender stamp you as “qualified” prior to your home search, our issue is with the word pre-approval.

Let’s take a closer look at its definition;

People interested in buying a house can often approach a lender, who will check their credit history and verify their income, and then can provide assurances they would be able to get a loan up to a certain amount. This pre-approval can then help a buyer find a home that is within their loan amount range. Buyers can ask for a letter of pre-approval from the lender, and when shopping for a home can have possibly an advantage over others because they can show the seller that they are more likely to be able to buy the house. Often real estate agents prefer to work with a buyer who has a pre-approval as it demonstrates that they are well-qualified to receive financing and are serious about buying a home. Note that a pre-approval letter from a lender is not a guarantee from the lender that a loan will be provided. (source: Wikopedia)

It’s the last line in this definition – which we know to be true – that we have an issue with.

The Problem: To an unsuspecting home buyer, having completed the lenders pre-approval process gives them the false impression that home financing is guaranteed.  With pre-approval  in hand, they then enter into a sales contract to buy a home, spend money on things like the home appraisal, inspections, title, legal fees, etc, only to find out  at the last minute that the lender’s decision maker is not willing to approve their formal loan application.  In the end, they are left with either a counter offer to a different and less favorable loan or a denied loan application.

The Cause:  The decision maker for the lender is known as the underwriter.  It’s during the underwriting process when the underwriter for the lender actually decides whether to approve or deny your loan request.

Yet the person that typically reviews your qualifications during the pre-approval process is known as the loan officer or loan originator – a sales agent for the lender.  In other words, the person providing the pre-approval has no authority to actually approve your loan.  And while their intensions may be good, loan officers are not trained underwriters.

This disconnect is why in many cases pre-approvals turn out to be worthless.

The Solution: Bypass the pre-approval process and insist on a Full Loan Review. To do so, select a lending partner experienced enough to know the difference. He or she will then have your loan application and supporting documentation reviewed by an actual underwriter prior to your home search.

Keep in mind that a Full Loan Review takes a bit longer to complete (about 1 week) than a simple pre-approval. However, once approved you will be left with the comfort of knowing that the loan you need will actually be provided and not changed or turned down later in the home lending process.

Mistake #4: Failing to Take Action Quick Enough

Today you viewed a really nice well-priced colonial that had many of the features you like in a home, but wasn’t perfect.  That night you’re lying in bed thinking, should I place a bid?  Can I afford it?  What would the commute to work be like?  Have I even looked at enough homes?  With too many questions unanswered you decide to hold off and do more research.

There are two types of home buyers:  Those that are interested in buying real estate and those that are committed to buying real estate.  As of today, which home buyer are you?

The scenario above is common to someone interested in buying real estate. They would like to own a home but lack the confidence to make an informed decision.

Those that are committed to owning real estate approach the home buying market a bit differently.  They know that the home of their dreams may only show itself for a brief period of time before being lost to another buyer.  They learned this lesson the hard way, when they were simply “interested” in buying real estate.

Now, as a committed buyer,

• they have assembled a strong home buying team
• they have secured a Full Loan Approval (with help from  their lender)
• they have narrowed their home search (with help from  their realtor)

As a committed buyer they are confident in the area they want to buy and can recognize when a home is priced right. As a committed buyer they are ready to move quickly (a valuable commodity to have in a competitive marketplace like the Northeast).

So the next time a well-price home in a desirable area presents itself, the committed buyer is ready to meet with the seller to firm up an offer, while the interested buyer is still trying to figure things out.

Mistake #5: Credit Changes prior to Closing

If you’ve selected your lending partner carefully, he or she will undoubtedly advise you to avoid the following issue that could ultimately derail your mortgage approval and home purchase:

• Incurring additional debt prior to closing.

Too often consumers are unaware of the fact that lenders will run an updated credit report the day of closing to ensure that no new debt has been incurred. (If they are unaware of this fact it’s probably because they committed mistake #1.)

Any new debt payments could delay your closing and/or void your loan approval if the underwriter determines that the new debt disqualifies you for your home loan.

It’s important to note that lenders are also looking at credit inquires – the potential for future debt. All inquiries need to be investigated as well to prove that new debt is not forthcoming.

The most common inquiry is a department store inquiry, where a soon-to-be homebuyer looking for a store discount opens a new credit card to purchase items such as furniture or appliances for their new home.

The Solution – refrain from making any credit change or inquiry prior to the closing of your home purchase.  This includes raising credit card limits or making a balance transfer as this may result in an inquiry by the creditor.

This information was provided to help you successfully purchase your new home.
I hope you found it useful.

To learn more about our Full Approval Program – Approval First – or to review your home buying options, simply contact me directly at 908.322.5423 or by email at  joe@americanunited.com

My team and I look forward to guiding you through the home buying process.              

– Joe

Joseph M. Farella

Executive Vice President ~ Mortgage Banking Division
American United Mortgage Corporation
210 Haven Avenue  |  Scotch Plains, NJ 07076
908.322.5423 Direct Dial  |  908.296.2142 Cell  |  908.935.0900 Fax
joe@americanunited.com  |  https://www.americanunited.com