As a full time professional Realtor in Florence, SC, I have seen three huge financial mistakes made by home buyers over and over again. Although they seem so simple to avoid or correct, it's often difficult to get buyers to understand how these three biggies can sabotage any attempt to purchase a home. Here's the advice I give my clients right up front when they begin their search for homes in Florence.
1. Review your credit! About six months before making an offer on a home, pull your credit report from any of the three major providers (Equifax, Experian or TransUnion). You don't want any surprises here. Evaluate it. If you find errors, fix them. If you have a few problems that need correcting, do it. The difference between a sub-600 and 700-plus score can cost a buyer as much as 3% or more in interest rates. That's a huge hunk of change!
2. Get pre-approved! Notice that I did not say "pre-qualified," which means virtually nothing in today's market. In order to get pre-approved, the lender must look at your credit score, calculate your expense to income ratio, etc. Without going into a lot of detail, here are just a couple reasons why this is so important. (a) The top range for the amount of money you can borrow will be established. You need to know this when looking for a home. (b) Your offer will be taken much more seriously by a seller if it is delivered with a pre-approval letter from a reputable lender attached. This could give you the edge over another offer that is similar to yours. (c) In our market, more and more sellers are refusing to consider offers that are not accompanied by such documentation. There have just been too many transactions fall apart on the way to closing.
3. Don't take out any new credit during the transaction! You would think this would be common sense but most people don't realize that new credit accounts (whether you actually use them or not) affect their score. So don't buy that car, accept that new credit card, open an account at a department store, etc. Most underwriters are rechecking credit scores a day or two before closing. If there have been any significant changes, the loan is subject to being pulled.
For a bonus though, I'd like to add one more huge mistake I see all too often. Unfortunately, there are too many Realtors who salivate just thinking about talking you into doing it. Most of the time loan officers can get people approved for more money and higher payments than what they really need or what their family budget can easily handle. Don't let a Realtor talk you into maxing out your approval limit if there are plenty of other options available. If necessary, cut back on your "wants" in a house so you don't stretch your family's budget and become house poor. Where's the joy in home ownership if you are stressed out making those payments?
If you would like a FREE copy of my special report "49 Essential Tips Every Home Buyer Should Know" just go to my website at www.FlorenceHomeTeam.com and you can either download or print out a copy.
