Buying a home ranks as the biggest financial transaction most people will ever make. Whether you’re a first-time buyer or a repeat buyer, a home purchase involves heavy-duty financing that often requires applying and getting approval for a mortgage. Here are some of the most common mistakes to avoid when buying a Berkshires home.
1. Working Without a Stone House Properties Broker
Real estate has always been impacted by market influences—from interest rates to buyer demand to the overall state of the economy—and starting last year, the coronavirus pandemic.
When housing inventory is low, properties can sell quickly and/or experience bidding wars.
Due to the COVID-19 pandemic, the Berkshires saw a buying frenzy last summer. According to the Berkshire County Board of REALTORS®, June 2020 sales volume for Berkshire County, MA reached $43 million, a 14 percent increase from the previous year.
But whether the market is fast or slow or whether inventory is low or high, there’s never a time when a homebuyer won’t benefit from working with a professional, experienced real estate broker from Stone House Properties.
By all means, start by looking online for houses. Data from the National Association of REALTORS® (NAR) says that 84 percent of homebuyers use the internet to look for homes. For 44 percent of all buyers, looking online was the first step in their home buying journey.
When you’re ready to proceed with your Berkshire home purchase, work with a real estate professional.
A Stone House Properties broker will guide you through every step of the process from finding the right property and preparing an offer to negotiating inspections and closing.
According to the NAR 2020 Home Buyer and General Trends report, 89 percent of all buyers purchased their home through an agent.
Stone House Properties brokers are licensed professional REALTORS®. Many hold licenses in both Massachusetts and New York. Their extensive expertise and deep knowledge of the Berkshire real estate market are keys to a successful buying transaction for all our clients.
2. Not Shopping for a Mortgage Lender
When you’re ready to buy a property, shopping around for a mortgage may not be fun. But it can help you find the best deal and save you money.
Homebuyers who compare interest rates offered by multiple lenders may see significant differences in the rates. According to the Consumer Financial Protection Bureau, considering just three lenders could save you thousands.
At the same time, you should dig deeper into a lender’s loan offers. Different lenders offer different types of loans.
A low or fixed interest rate, for example, might apply only for an introductory period. Be sure to find the APR, or annual percentage rate. Federal law requires lenders to include the APR along with an advertised interest rate.
In addition to shopping for a lender, you can also arm yourself with information. Here are some consumer resources to check out from government sources:
- From the Consumer Financial Protection Bureau: Buying a House: Tools and Resources for Homebuyers Be sure to look at Step 2, Exploring Your Loan Choices.
3. Holding Out for the “Perfect House”
When you start your home search, make a lists of “must haves” and “nice to haves.” You’ll streamline the search process by focusing only on the listings that meet your criteria.
The “perfect house” is the one that meets your needs.
You can adjust the list as you search. There may be features you don’t want to give up, like a first-floor primary bedroom. However, if a home doesn’t have a primary bedroom on the first floor, you could look for homes with a full bath and a room on the first floor that could serve as a primary bedroom.
Share your criteria list with your Stone House Properties broker. If you revise the list, be sure to keep your broker informed. Your Stone House broker can work that much more effectively by scoping out properties that fit your revised criteria.
The “perfect house” purchase may also involve a timeline. Keep your broker informed of your purchase and move-in schedule.
4. Neglecting to Budget for Closing Costs
Closing costs make up 2 to 5 percent of the home’s purchase price, according to the National Association of REALTORS®.
Budgeting for the down payment is not the only financial component to plan for.
A lender is required to provide a closing disclosure at least three business days before a buyer closes on the mortgage loan. This five-page document includes the loan terms, projected monthly payments, and the fees and costs associated to get a mortgage.
The three-day window is meant to provide the buyer time to evaluate the mortgage loan and ask any questions before closing.
You’ll need to budget ahead of time for these costs. Be prepared by knowing in advance what charges will make up the closing costs. You can find out in the NAR blog post, “Upfront Cost of Buying a Home.”
5. Making Big Purchases Before You Close
Most homebuyers will take out a mortgage to finance the purchase of a home. After the home seller accepts an offer, a lender will assess the buyer’s creditworthiness in a process called underwriting.
Underwriting includes looking at a buyer’s credit score to make sure it hasn’t changed since pre-approval. As a homebuyer, you’ll want to avoid taking on new debt during that period.
Why? Your mortgage lender pre-approved you with a particular credit score that accompanied your loan application. Large purchases, whether paid for with cash or on credit, can change your credit score and potentially raise your loan’s interest rate, delay your closing, or at worst, change your pre-approval to a denial.
