When you first decide it’s time to buy a Southern Maryland home, you’ll head down the road toward home ownership. But before you even take the first step, you’ll encounter a fork in that road. Sadly, most first-time homebuyers take the wrong route and end up disappointed.
Not having a clue about your credit
Do you know what’s in your credit report?
Nearly 80 percent of credit reports contain errors. Did you know that nearly a quarter of them contain mistakes that are so bad that they result in a denial of credit?
To avoid being one of those who gets rejected, order copies of your credit reports and go over them looking for errors. You’re entitled to free copies of your credit report from each of the three major credit bureaus every 12 months. Get yours at AnnualCreditReport.com.
If your find errors, file a dispute and clear up the problems before you apply for a mortgage. The Federal Trade commission offers additional information about how to obtain your free credit report and how to dispute errors you may find in your report.
Shopping without knowing how much you can spend
What is at that fork in the road that we talked about earlier? Sometimes, it takes homebuyers online to look at Southern Maryland homes for sale and, sometimes, to open houses or new-home communities.
That’s a big mistake.
Homebuyers – especially those buying for the first time – tend to overestimate how much they’ll be able to borrow. If you’re among them, you’ll most likely end up looking at homes that are out of your price range. After that, what you can afford will pale in comparison.
Don’t set yourself up for disappointment. The next logical step after you repair your credit is to start shopping for a lender – not a home.
Not shopping strategically for a loan
We’re amazed at how casually many people treat the sale and purchase of an investment as large as a home. In fact, a National Association of Realtors’ survey finds that most real estate consumers hire the first real estate agent they meet!
And, the Consumer Financial Protection Bureau clams that half of borrowers use the same cavalier attitude when choosing a lender.
Until you get a mortgage, the quoted terms aren’t set in stone. Shopping for the best terms will save you money on your closing costs and, quite possibly, your monthly house payment.
Take the same care in finding and lender and comparing loan products that you use when you’re shopping for a smartphone or a big-screen TV.
A good place to choose lenders to compare is Bankrate.com. Remember, you want to compare the APR, and the stated rate is not necessarily what you’ll be offered. This is why you must apply for preapproval to determine your budget.
Not being honest
Remember “liar loans”? It wasn’t that long ago that lenders were approving mortgages for just about anyone with a heartbeat. Those loans are dinosaurs; they no longer exist. Lending standards have tightened considerably since then, and lenders are bound by statute to ensure that the borrower can afford to make payments on the loan.
This means that you are required to provide documentation that proves the income you state on your application. So, be honest on all parts of the loan application.
Switching jobs after loan approval
One common requirement for loan approval is your employment situation. Most want to see at least two years with your current employer or in your current field. If you’re self-employed, they’d like to see that you’ve been in business at least two years.
Don’t make any changes to your employment situation during the period between applying for your loan and closing on your new home.
Changing your financial picture
It is tempting to start buying furniture and appliances for your new home, but don’t do it. The lender will one run last credit check just before closing to make sure nothing in your financial picture has changed. If you buy large items on credit or open new credit accounts, your score may go down.
Also, the new debt you’ve taken on may change your debt-to-income ratio, and you’ll be denied the loan and the closing will be cancelled or postponed.
For many Southern Maryland real estate consumers, the entire mortgage process is foreign and, quite frankly, dull. But, it involves your money—and lots of it—so learn as much as you can and you should sail through the process.
La Plata MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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