How To Avoid Home Buying Mistakes
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Not doing your homework. Enter the market well-prepared by researching location, school district, deed restrictions and taxes.
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Trying to make a shrewd investment. Focus on finding the best place for you and your family to live rather than trying to predict the real estate market.
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Choosing a poor location. Consider what part of town you would like to live in and avoid homes located on busy streets.
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Overlooking an inferior floor plan for an attractive exterior. Choose a great floor plan over a great exterior because you'll spend far more time inside the house than outside.
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Overlooking how the home will function for your family. Consider features that are most important to your family and choose a home that will meet those needs.
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Not having the home properly inspected when buying a resale. Hire a state-licensed, professional inspector to evaluate the home's true condition, which could save you thousands of dollars in repairs and maintenance.
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Not having the home properly inspected when buying a new home. Research the number of homes sold, homeowner satisfaction, years in business, industry recognition and warranties offered.
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Not getting what you want because you're impatient. If it's a used home, allow time to negotiate and get the best deal possible. Refusing to rush the process could save you $5,000 on the purchase price.
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Waiting for a better time to buy based on the market and interest rates. History shows that those who purchased homes and kept them for three to five years or more did better than those who didn't. Waiting is one of the biggest mistakes a home buyer can make.
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The biggest home buying mistake is not buying at all. Buying a home will give you a place to call your own and allow you to take advantage of tax breaks and build equity.
Choosing a Lender
Despite an excess of loans and lenders, comparison shopping has been eased by the development of computer-loan origination systems and mortgage-reporting services - firms that survey major lenders in metropolitan areas every week or so and publish information sheets on who is offering what loans on what terms.
Shop for lenders offering the best deals. Check with several mortgage companies and use one or more reporting services. Rely on your own efforts, lots of telephone calls and possibly some old-fashioned legwork. If there isn't a reporting service covering your area, begin the search at your own bank or savings and loan.
Sources of Mortgage Money:
Independent Mortgage Companies make just over half of all home mortgages, including most VA-guaranteed and FHA-insured loans.
Savings Institutions: Savings and loan associations and savings banks originate close to a quarter of home mortgages. Most are conventional loans - those not guaranteed by the VA or FmHA, or insured by the FHA.
Commercial Banks are active in residential lending. Banks also are a major supplier of loans for mobile-home buyers.
Mortgage Brokers act as intermediaries. A broker keeps tabs on the mortgage market through ties to local, regional and national lenders, and can refer a prospective borrower to a mortgage banker, savings institution or a commercial bank. Brokers don't lend money and can't approve loans.
Credit Unions make close to one-third of all first-mortgage loans, but you must be a member.
Public Agencies: State and local finance agencies make below-market-rate financing available to eligible low- and moderate-income first-time buyers through the sale of tax-exempt bonds.
Employers and Unions: Don't overlook your employer as a source of assistance. An employer may subsidize the interest or even act as a lender. Unions are another possibility. The AFL-CIO offers what it calls "Union Privilege." Unions that sign on can make first-time home loans available to eligible members for as little as three percent down.
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Role of A Title Company
Now that you've decided to buy a home, what happens between now and the time you legally own it? The next step is to obtain title for the property from the title company. A title gives the owner the right to possess and use the property. But before receiving title, the title company will need to complete the following:
Earnest money: To show the seller and his agent you are a serious buyer, you will be asked to give the title company a deposit called earnest money. If the sale goes through, the earnest money is applied toward the down payment. If the sale falls through, the earnest money will not be given back unless it is stated in the offer to purchase that it is refundable.
Title search: A title search is a thorough check of the records concerning the property. It is performed to verify the seller's right to change ownership. A title search will uncover any demands, faults, liens and other privileges or restrictions on the property.
Document preparation: Appropriate forms are prepared for settlement.
Settlement: Many events happen during settlement. The seller signs the deed, the buyer signs the new mortgage, the old loan is paid off and the new loan is established. The seller, real estate professionals, attorneys, surveyors and others performing services for the parties are paid. Title insurance policies are then delivered to the buyer and their lender.
