1. NOT KNOWING YOUR CREDIT SCORE –THAT’S MISTAKE #1!
You need to know your credit score prior to even looking at the first home.
If your score is lower than what is needed to buy, you need to start immediately on improving that credit score. Mortgage interest rates are based on your credit score. Pull your free annual credit report at https://www.annualcreditreport.com, print it out and verify all the information including the personal information: your name, current contact info, and address. Once you have filtered out the errors and corrections, you can submit those corrections to each of the credit bureaus. Each bureau will investigate your requests and send you a new (free) report in 30 days.
Paying down your balances to no more than 30% of the limit will help increase your scores dramatically. The lower your credit score, the higher the costs of borrowing. Both Fannie Mae and Freddie Mac charge higher up-front fees to borrowers with 740 and below credit scores.
2. BUYING A CAR BEFORE A HOUSE? NO, NO, NO!
When you open new credit accounts, such as credit cards or auto loans, your FICO credit score could drop according to the creator of the FICO score. Home buyers are advised to wait until they close on their home before taking on any new credit.
If you are thinking about buying a home, do not open any new credit accounts during the process as this may affect your credit score and limit your income-to-debt ratio.
3. HOME INSPECTIONS – ARE THEY NECESSARY? ABSOLUTELY!
Home inspections are even more important today, than ever. Along with an increase in mortgage defaults and foreclosures, homeowners are less likely to keep up with appliances, and home repairs. Home inspections are great tools for understanding the true value of any home. Only with an inspection can problems with the home’s foundation, electrical, plumbing, roof, insulation, heating or air conditioner be found. Mold and termite inspections in South Florida are highly recommended. Buying a home AS-IS is okay, but only with the “right to conduct a home inspection” agreement.
4. NO LAWYER – NOT NECESSARILY!
Your home buying experience is full of professionals: Realtors, Inspectors, Mortgage Bankers, Title Escrow Professionals and your own Lawyer. It is not mandatory that you hire an attorney but it is recommended you do.
5. UNDERSTANDING THE PROCESS.
Know the risk of your escrow deposit. If you back-out of any contract just because you changed your mind – your deposit may be at risk. If your contract is contingent on your ability to receive financing, your deposit(s) may be refunded. The home under contract must appraise for the amount you are financing, if it does not, you may be obligated to bring the difference to closing or you may be able to cancel the contract.
6. DO YOU REALLY NEED ALL THAT INSURANCE? ABSOLUTELY! EVEN IF YOU PAY CASH!
Your standard policy pays for theft, wind, fire, lightning, hail, and explosion damage. However, damage caused by flooding and earthquakes are separate policies and problems caused by neglect of routine maintenance may not be covered.
