Buying a new home is one of the biggest and most important financial decisions you’ll ever make. You can’t just change your mind and “return” it within 30 days from purchasing because you don’t like it anymore or you discovered that it requires more fixes than the broker said. Keep in mind that you’ll live here for at least a few years and maybe even the rest of your life. So, you need to ensure that you have all the relevant information before making a decision.
Here are the pitfalls you need to avoid at all costs.
1. Skipping Mortgage Qualifications
First-time buyers tend to become very excited about owning a home, so they dive directly into house-hunting. They find the perfect house, get excited about it, and then discover they can’t afford it. More often than not, they let their emotions cloud their mind and, instead of looking for new homes, they accept financing from the builder without reviewing the monthly payments or if they can afford it. Most of these options are detrimental to the buyers.
Before viewing any homes, make sure to submit your financial documents to your lender, be it a bank, builder/developer, or credit union. Meet with at least three of them to see the different rates and options. Also, think about who you would like to work with before committing to one.
Meet again just before signing the papers if you think you’ve done something that affects your credit score.
2. You Don’t Ask for Estimates on the Home’s Value
How can you ensure that you pick the best mortgage?
By getting good faith estimates, of course.
Here’s the thing: the Truth of Lending Act protects you by giving you all the information about the credit you’re about to take. That means you’ll have access to a full disclosure of the terms, the costs of the loan, and the closing fees. The document is known as “good faith estimate” (GFE), or simply put, the credit limit. The problem is that most people fail to get good faith estimates when searching for new homes.
One of the reasons good faith estimates are so important is that they include the annual percentage rate (APR.) This number can help homebuyers compare lenders’ offers and pick the one that fits their needs and budget best. Knowing a competitor’s APR also gives you the power of negotiating some expenses, such the closing fees.
3. Not Negotiating the Terms of the Contract
Real Estate agents tend to be very aggressive, giving the impression of an impending conflict. That is not necessarily true.
We know most of you want to avoid conflicts at all cost, but remember that this is the single most significant purchase you’ll make in your life.
One of the best negotiation tactics you can use is to make an offer based on the value of the home, not the price required by the builder. Do your homework and try to get information about a recent sale in the neighborhood or the area. Use this information to gain some leverage.
If you are reluctant to negotiate the price, you can hire a professional to do it for you.
4. Not Asking the Neighbors about the Builder’s Reputation
One of the first things you need to do when looking to purchase a house, especially if it’s a custom home like green home, is to research the home builder’s reputation. Don’t stop to the information you find online or what the salesperson tells you. The most reliable and valuable source of feedback is the community you may become part of.
Don’t be shy and ask your potential neighbors about their experience with the home builders. Questions like what problems they had (if there were any), how long it took to solve it, or if the builder has a bad reputation, should be at the top of your list.
5. Not Asking for a Punch-List
Don’t rush into closing the sale.
Inspect every inch of the house carefully. Or, better yet, have a professional do it for you. Otherwise, you might end up with a lot of repairs that can increase your costs dramatically.
Make sure to ask the contractor for the punch-list – a list of items that don’t meet the terms of the contract and need to be fixed by the contractor before the final payment.
Reputable home builders will provide you with one by default but will occasionally skip the inspection. So, once the repairs are done, inspect the house one more time to ensure everything is in order.
It’s easy to get swept away by beautiful new homes, fancy neighborhoods, and “best offer on the market” promises. Be level-headed, don’t let your excitement get to you and don’t let the salespersons intimidate you. Make it a must to gather as many facts as you can before signing the contract.