It seems like no matter how careful you are, some deal killers are unavoidable with real estate. Others, however, are preventable, so make sure you pay attention to all the important details if you want to keep your real estate deal alive and well!
1. Your Mortgage Pre-approval
After you receive your pre-approval letter and decide to move forward with the purchase, the lender will start your file. He or she will give you a list of paperwork, order an appraisal and credit reports, verify your employment, income, and more. After that, your file is sent to a loan processor who will review all of the information and the appraisal. Then your loan package is sent to the underwriter.
The loan underwriter is the one who ultimately determines whether or not you are an acceptable credit risk. He or she assesses your ability to pay back the loan, your credit, and the collateral used to secure the mortgage - in this case the collateral is the home. Then, before funding the loan, the underwriter performs what is known as a "soft pull" of your credit information to see if anything has changed.
This is the point where many borrowers make mistakes. If you hope to keep your purchase alive, don't change your financial picture and from the time you apply for the loan until after your final approval. This means no shopping on credit for appliances, furniture or anything else. Don't switch jobs, fall behind on your bills, co-sign a loans, or reduce the income stated on your application.
2. Home Inspection Problems
All homes, including new construction homes, may have problems. Going into the process not understanding this can set you up for a failure. Ideally want to find a home from someone who conscientiously took care of it during their entire ownership, but those are few and far between.
It's a good idea to set your sites on finding a home that has small, easy-to-fix problems, and don't worry too much if some are worse than others. When considering making an offer, don't fret the loose doorknob but negotiate when it comes to water damage or worse. A super picky homebuyer, who plans on "nickel and diming" the homeowner into replacing missing switch plates and dripping faucets, is the picture of a deal-breaker-in-the-making.
3. Read Homeowners Association Documents
If you're purchasing a home in a managed community with a homeowners association (HOA), you'll be given quite a bit of paperwork to read and approve. Because there may be deal killers included in the fine print, it's important to get to this task immediately upon receipt of the documents.
Look for any information about liens against the property; current litigation against the HOA, the builder, or the developer; and any red flags in the HOA budget. Since these documents aren't easy to read and understand, it is worth the money you'll spend to have your attorney look them over and advise you of any potential deal killers lurking within.
4. Budgeting Blunders - Closing Costs
The real estate industry does a great job of reminding purchasers that they'll need a down payment - typically from 3 percent to 20 percent of the loan amount. Unfortunately, they often fail to inform consumers about are the loan's closing costs - the money you will be required to pay before the house is yours. 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 host of other factors. I'll be happy to give you more details about the closing costs!
Unfortunately, this lack of information frequently causes real estate deals to disintegrate. To avoid this particular problem, pay attention to all communications from your lender.
For a smooth, low-stress real estate transaction, slow down, keep your expectations realistic and heed the advice of your real estate agent & attorney.