If I had to narrow this list down to just one mistake, this would be it! I can't tell you how often I am contacted by a potential buyer who wants to look at homes, yet they have no idea if they are even qualified to purchase. This is the classic case of the "cart before the horse". If you haven't been pre-approved, you're home shopping in the dark without a flashlight. You may be looking in a price range that you cannot afford. Worse, you may be able to afford much more than you think!
Another important factor is that you should not make an offer on a home without also submitting a pre-approval letter. The reason for this is that few listing agents will risk taking their listing off of the market unless they are convinced that you are fully qualified to make the purchase. For this reason, they usually request that a pre-approval letter is submitted with your offer. If you don't include one, your offer will most likely be rejected.
My advice: Contact a lender right away and get pre-approved before shopping for homes!
I can recommend a mortgage specialist who will help you determine your purchasing power and who will help you with a loan when you find the right home. Once you are pre-approved, the lender will provide you with a letter that can be submitted with the purchase offer. You can apply for an FHA loan with 3.5% down, VA loan with zero down, or conventional with 5%, 10%, 20% or more down payment. There are many financing options!
Many buyers are shopping for the right house, but in the wrong price category. For example, a buyer may ask me to find an upgraded, 4 bedroom, detached home for under $300,000 when in reality, detached homes in the city typically start at $400,000 for a 'fixer". This miss-match occurs when a buyer hopes some great deal will just fall out of the sky, or they have decided on a certain level of home but have no idea of what it will realistically cost.
My advice: Simple - Change your criteria or your price!
Perhaps one less bedroom would do, or look in another city or area where home prices are a bit lower. Consider a town home instead of a detached. Maybe you can live with a 2-car garage instead of a 3. At worse case, just wait until you can afford the home you are really looking for. In any case stop trying to find something that can't be found at that price!
The fact is that for the average homebuyer, there are probably dozens of homes for sale that would be suitable for them. Some buyers though, have an "ideal" home in mind, right down to the shape of the pool, the color of the walls, and the length of the driveway. For this buyer, no home will do! Every home we see has flaws so we have to keep looking for that perfect place.
My advice: Understand your true needs!
Realize that you may never find your perfect home (unless you win the lottery!). The most important things are finding a good neighborhood, a workable floor plan, a good location, and adequate space (square feet, number of bedrooms, etc) You can always add granite counter tops and stainless steel appliances. You may find great homes in the city next to where you thought you wanted to be. The other school district just might be fine after all. And hey, you can always add a few tall trees to block that neighbor's view of your new yard!!
Many buyers feel that they have to get a deal (ironically, these are often the same people who want "top dollar" for their home when it's for sale!) It's true that it is sometimes appropriate to offer a lower price on a home. Many equity sellers pad their sales price in anticipation of a lower offer. Fixer homes (homes in need of a great deal of work) should always be ripe for a bargain deal. A home that has languished for many weeks on the market may welcome a low offer. Also, buying during the fall/winter holidays is a good idea. There are less buyers in the market during this time, so less competition.
Bank owned (or REO) homes are typically priced to sell. While the lender may negotiate, expect to pay reasonably close to list in many cases. Short sales are another matter. Buyers are very often surprised to find out that a short sale home sold for higher than list price. While buyers have been programmed to offer less than list price, a short sale price should in many case be thought of as an "auction opening bid price" (read more about it, here ) .
There are also "hot" properties; new home listings that are very desirable for the price. Bidding low on these is futile, as there is sure to be lots of competition. One way to judge this is to note the number of real estate business cards at the premises. If there are a large number of business cards on the table and the listing is relatively new, the property is "hot" - Expect competition!
My advice: Check recent sales comparables and be prepared to pay a fair price!
You may certainly offer a low price, but follow that with realistic expectations about actually getting the home. You may have to compete with other buyers for many homes. The seller will inevitably go with the "highest and best offer", so keep that in mind. Also, always put yourself in the place of the seller. If this was your home, would you part with it for 30% below list? I will be happy to provide you with a list of recent, comparable sales. This will give you a benchmark on which to base your offering price.
I don't think anything is more frustrating and disappointing for a buyer than finally deciding to put an offer on home, only to find out that it just went into escrow. I have been with many buyers who find a great home, but then hesitate on making the offer. When the decision is finally made, we often find out that the home is gone! Also, many buyers feel they need to be in the market looking for homes for many weeks, even if they had found the perfect home on the first day of looking! The justification is usually, " I want to see everything that is out there ".
My advice: If you find the right home, make an offer right away so that you lock it down and beat any competitors.
If you make an offer you can always withdraw it if you change your mind, plus you usually have 17 days or more to investigate the home at no risk to your deposit (as long as you have not removed contingences). Whether we are in a "buyer's market" or not, please do not fall under the impression that all of the homes for sale will just sit there and that you can take your time to make a decision. While this is true with some homes, it often is not. Think about it this way: You (the buyer) obviously chose to see a certain home because it desirable and that it fit one or more of your criteria. Do you think other buyers might not come to the same conclusion? If you did your research and found a great home on the first day you looked, don't believe it will still be there in a few weeks! If it's right, get it now before someone else does!
This buyer is afraid to go ahead with an offer out of fear -- fear that the market will continue to drop, fear that they are making the right decision, or just fear of the responsibility of being a homeowner.
My advice: There's no reason to be terrified of buying a home!
Do you really want to be a renter for the rest of your life? Buying a home is a good thing! The market may indeed rise or fall, but if you are planning to be in the home for many years you will probably be fine. The fact is that no one really knows where the market will be several months into the future, or whether we will have higher or lower home prices, mortgage interest rates, or home inventory. At the end of the day, if you still find that you are worried about the housing market dropping more, then don't buy now -- stay put and try to time the market. Buying a home is a big decision and no one should lose any sleep over it. You can always choose your time to buy in the future.
Apologies for being blunt, but it takes some cash to be a home owner! Many buyers call me looking for a loan take-over, a lease-option, zero-down, or some type of distress sale, in the hopes that they can get into home ownership without having any cash. Unfortunately, the lending world has changed dramatically and most of these options will not work. Consider:
You will almost always need some percentage of down payment money in order to qualify for a home loan.
Loan take-overs are a thing of the past -- Few homeowners have assumable loans.
Lease-options typically require between 1 and 5% of the purchase price as an option deposit (more about that, here )
Zero-down loans went "bye-bye" with the sub-prime loan crisis
Sellers offering "owner financing" are usually just giving you a better interest rate. They still want a 10% or 20% down payment.
One question I'm often asked is: "We have no cash for a down payment, but do I know any home owners who are desperate to sell and would be happy to have us move in and take over their mortgage?". We used to see "creative financing" techniques like wrap-around loans, or A.I.T.D.s (All Inclusive Trust Deeds). These techniques are lender fraud and cannot be done legitimately, as they are in violation of the seller's mortgage agreement.
My advice: Unfortunately, you will need some cash to buy a home!
You may qualify for an FHA loan with only 3.5 % down. There are also a few low-income down payment assistance programs (e.g.., Orange County MAPS program). You may be able to have a relative or friend "gift" a down payment for you. Regardless, you will have to have money for closing costs, home owners insurance, loan fees, etc. I can help you contact a mortgage specialist who will check on your qualifications for a low down payment loan, or down payment assistance. Bottom line though, is that if you have nothing in the bank, don't shop for a home. Instead, lease a home, save money, and buy later, when you have accumulated enough cash for a reasonable down payment and expenses.
Call me at 949-290-3263 or at firstname.lastname@example.org. I will be happy to help you formulate a plan to achieve your home buying goals! I have several lenders who can get you pre-approved quickly. I will go through your requirements and search for homes that meet your needs. Finally, I will work closely with you to determine the correct price category and lowest offer price so that we can avoid losing your dream home to another buyer!