1. Not getting preapproved upfront before shopping for a home.
Why is this a mistake? First, you need a preapproval letter when you make an offer on a house. It tells the owner you can obtain the funding you need to purchase their house. In a seller’s market it’s important to have that letter on hand. Houses move quickly. You may find your dream home and lose it because you’re waiting around for your preapproval letter. Second, without preapproval you don’t know exactly how much financing you can get. If you’re looking at $400,000 homes and you only qualify for $300,000, you’re wasting your time, the realtor’s time, and you may be disappointed when you find out you can't get that home you saw and loved.
2. Taking out loans or applying for credit before closing.
Of all the mistakes home buyers can make, this is a big one. You don’t want to do anything that could negatively impact your debt-to-income ratio (DTI), the percent of your monthly income that goes toward debt. Taking out loans or applying for a new credit card can increase your DTI. An increase in your DTI can kill a loan deal. It’s ok if you run up your current credit card, but do not take out a loan to buy a new car or apply for the credit card because the deal was just too good to pass up. Wait until after you’ve closed on the house.
3. Changing jobs or a change in your income during the loan process.
We understand that “life happens.” There are times when you have no control over a change with your employment. If you’re taking a pay cut, this will factor into your DTI which could significantly impact the loan. Any change in employment can impact when you close. Even a good change, like a promotion with a raise, must be verified and documented with pay stubs, so expect delays.
4. Sourcing funds for the down payment and closing costs.
When you’re getting funds together for your earnest money, down payment, and closing costs, it’s important to communicate with us. Cash deposits within 60 days of closing must have a paper trail that traces the source. You can’t just deposit cash you had on hand during the application process and expect to use it. If you sell a vehicle there needs to be a bill of sale. If you’re given a cash gift from a family member, there needs to be documentation from their account. Let us know how you’re getting these funds together, so we can tell you what documents you need.
5. Waiting until the last minute to pick homeowners insurance.
Do not put this off. Find homeowners’ insurance within the first two weeks after going under contract. The insurance policy for the dwelling (not your belongings) needs to be a certain amount of coverage. The bank owns your home, and they want at least enough coverage to rebuild the home. Some insurance agents will quote the lowest premium possible, but it doesn’t provide enough coverage. We need to verify the insurance is sufficient. If it turns out the insurance premium you need to pay is higher, it could affect your DTI. That makes you a greater risk and you may have to buy down your rate. Bottom line: Don't make this mistake. Find homeowners’ insurance as soon as possible.