When you are in the home buying process, mistakes can be costly to you both financially and emotionally. Buying a home will likely be your biggest purchase and right now the housing market is very competitive. There is greater sensitivity and scrutiny on your financial matters when looking to borrow money. Let’s make sure you are prepared and in the best position to secure your dream home. Here are five common mistakes MSB recommends you avoid to keep your home purchase on track (and within your budget).
Mistake #1: Going house hunting before talking to a lender. Getting prequalified or preapproved is critical before beginning your home search. It’s also the first step in setting a realistic home buying budget. However, there is a difference between the two. A prequalification requires limited documentation to identify a “price range” for homes you may qualify for financing. The smarter decision is to get preapproved. Preapproval requires more documentation, including your financial information, but it is confirmation to the seller that you do qualify for a loan to purchase the home. Getting preapproved before you look makes a huge difference to you as the buyer. It could push you and your offer to the head of the line when a seller is considering which offer to accept.
Mistake #2: Taking excessive time off work before your closing. Hourly employees should be mindful about inconsistent paycheck amounts as this information is taken into consideration when determining your loan amount and ability to pay. Try to keep your income as steady as possible leading up to your home purchase.
Mistake #3: Not understanding all home buying costs beyond the purchase. Most buyers know about the down payment, but there are other costs to prepare for: real estate taxes, homeowners insurance, loan closing and settlement costs. You will also need to factor in moving, maintenance and repairs.
Mistake #4: Making large bank deposits before your loan closes. Your bank statements shouldn’t change drastically prior to closing. All large deposits will need to be documented. In the event a large deposit was a gift that doesn’t require repayment, you will need a gift letter from the donor explaining the source of the funds and stating it is a gift.
Mistake #5: Buying big-ticket items before you close. You don’t want to spend a lot or start racking up debt just before your loan closes. It could disqualify you from getting your home loan - even if you have already been preapproved. So while it’s tempting to buy a car, furniture or other costly items, it is best to save those purchases for after your closing day and once you have settled into your home.
This may be the biggest investment you ever make. Treat it that way!
At McHenry Savings Bank, we empower our clients by offering information, products and services to Go Fearlessly Forward®. Please call one of MSB’s Home Loan Experts today at (815) 385-3000 with any questions. Equal Housing Lender. NMLS# 630527. Member FDIC. FarmerMac Approved Lender.
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