The 6 Biggest Mistakes Most Home Buyers Make

The purchase of a new home is a very exciting process.  There are so many things to consider while you are searching for the right property like location, schools, proximity to freeways, square footage, lot size, etc. that many home buyers make certain assumptions about their ability to qualify for the loan on that new home.  Savvy home buyers won’t let those assumptions get between them and their dream home. 

Mortgage underwriting guidelines are the tightest they have been in many years.  As a result, your income, assets, down payment sources and every other aspect of your ability to qualify will be under intense scrutiny by the underwriters.  Understanding the six biggest mistakes most home buyers make will allow you to avoid those pitfalls so that nothing stands between you and your dream home. 

Mistake #1: Not getting pre-qualified

Let’s be honest.  It is much more fun to start looking at different properties with your real estate agent than it is to fill out a home loan application.  However, you MUST get pre-qualified for a home loan first. 

Investing your time looking at properties that are beyond your price or down payment range is a waste of your own time.  With Magnolia Bank the pre-qualification process is fast, easy and best of all, free!  Simply click on the red Get Rates button to set your pre-qualification in motion.

Mistake #2: Borrowing the down payment

Underwriters will require that you verify the source of your down payment.  Whether the down payment money is in your checking or savings account, in a CD or is a gift from a relative, the source of the down payment must be able to be verified and documented. 

Mistake #3: Business funds for the down payment

If you are self employed, do not attempt to use business funds as a source of the down payment.  Only funds in a personal account are an acceptable source of the down payment.  Also, do not try to simply transfer funds out of a business account and into a personal account for the purposes of a down payment.  If the transfer takes place within 90 days of closing, the underwriters will want to know what the source of the deposit was.  If the source is a business account, the funds will not be allowed.

Mistake #4: Credit inquiries

Your credit score is of vital importance when qualifying for your new home loan.  Do not apply for credit cards, car loans, lines of credit or any other type of credit during the home buying process.  These will all result in inquiries on your credit report and will affect your credit score.

Click here to obtain your free credit report and credit score.

Mistake #5: Not understanding mortgage insurance

If you are putting less than 20% down on the purchase of a new home, you will be required to have mortgage insurance on the loan.  Mortgage insurance is different than hazard insurance.  Mortgage insurance is coverage for the lender so that if you default on the loan the lender will be paid back all of the money they are owed.  It does NOT insure the borrower. 

On conventional loan, mortgage insurance is referred to as private mortgage insurance (PMI).  On an FHA loan, there are two types of mortgage insurance: up front mortgage insurance premiums (UFMIP) and monthly mortgage insurance premiums (MIP).  The amount of the monthly mortgage insurance payments will vary depending on the amount of the down payments, credit score and loan amount.  Click here to learn more about mortgage insurance and calculate how much it will be on your new home loan. 

Mistake #6: Lack of preparedness

With the wealth of information available at www.CloseYourOwnLoan.com, from Magnolia Bank's professionals and from your real estate agent, there is no reason for a home buyer not to be prepared for the home buying process. 

In an effort to ensure that every home purchase goes as smoothly as possible, Magnolia Bank has created the Home Buyer’s Playbook.  The Home Buyer’s Playbook is a step by step guide to the purchase process.  It will walk you thru the entire process form getting pre-approved to making offers on properties to preparing for the close of escrow.  It can be downloaded for free by clicking here.

Speak With A Loan Originator 

Would you prefer to speak with a Loan Originator over the telephone?  Please call us directly at   1-800-276-CYOL(2965) and choose option 1.  Or, click here to have one of our experienced representatives contact you directly.