This buyer has met with a mortgage broker (or lender) and discussed their
situation. The buyer has informed the broker regarding their income, expenses,
assets and liabilities. The broker may also have seen their credit report. The
buyer provided you with a letter from the broker stating an opinion of what the
buyer can afford.
Pre-approved
This buyer has provided a broker written evidence of income, expenses,
assets, liabilities and credit. All information has been verified by a lender.
As a result, much of the paperwork for this buyer's loan has been completed.
This buyer will probably be able to close quickly. They provide you with a
letter (pre-approval certificate) from the lender. You're as certain as possible
that this buyer can close.
As a potential buyer, you can see that
being pre-approved will give you the best chance of getting your offer accepted.
This is critical in a competitive situation.
2. Making verbal agreements.
If you're asked to sign a document containing
instructions contrary to your verbal agreements--don't! For example, the seller
verbally agrees to include the washing machine in the sale, but the written
purchase contract excludes it. The written contract will override the verbal
contract. More importantly, your state may require that contracts for the sale
of real property be in writing. Do not expect oral agreements to be enforceable.
3. Choosing a lender just because they have the lowest rate. While the
rate is important, consider the total cost of your loan including the APR , loan fees, discount and
origination points. When receiving a quote from a lender or broker, insist that
the discount points (charged by the lender to reduce the interest rate) be
distinguished from origination points (charged for services rendered in
originating the loan).
The cost of the mortgage, however, shouldn't be
your only criterion. Have confidence that the company you select is reputable
and will deliver the loan with the terms and costs they promised. If in the
final hours of the transaction you determine that the lender has suddenly
increased their profit margin at your expense, you won't have time to start
again with a different lender. Ask family and friends for referrals. Interview
prospective mortgage companies.
4. Not receiving a Good Faith Estimate. Within three business days after the
broker or lender receives your loan application, you must receive a written
statement of fees associated with the transaction. This is both the law and the
best way to determine what you'll pay for your loan. Bring the Good Faith
Estimate (GFE) with you when you sign loan documents. You should not be expected
to pay fees which are substantially different from those contained in your GFE.
5. Not getting a rate lock in writing. When a mortgage company tells
you they have locked your rate, get a written statement detailing the interest
rate, the length of the rate lock, and program details.
6. Using a dual agent--i.e., an agent who represents the buyer and the
seller in the same transaction. Buyers and sellers have opposing interests.
Sellers want to receive the highest price, buyers want to pay the lowest price.
In the standard real estate transaction, the seller pays the real estate
commission. When an agent represents both buyer and seller, the agent can tend
to negotiate more vigorously on behalf of the seller. As a buyer, you're better
off having an agent representing you exclusively. The only time you should
consider a dual agent is when you get a price break. In that case, proceed
cautiously and do your homework!
7. Buying a home without professional inspections. Unless you're buying a
new home with warranties on most equipment, it's highly recommended that you get
property, roof and termite inspections. This way you'll know what you are
buying. Inspection reports are great negotiating tools when asking the seller to
make needed repairs. When a professional inspector recommends that certain
repairs be done, the seller is more likely to agree to do them.
If the seller agrees to make repairs, have your inspector verify that they are
done prior to close of escrow. Do not assume that everything was done as
promised.
8. Not shopping for home insurance until you are ready to close. Start
shopping for insurance as soon as you have an accepted offer. Many buyers wait
until the last minute to get insurance and do not have time to shop around.
9. Signing documents without reading them. Whenever possible, review in
advance the documents you'll be signing. (Even though some specifics of your
transaction may not be known early in the transaction, the documents you'll
sign are standard forms and are available for review.) It's unlikely that
you'll have sufficient time to read all the documents during the closing
appointment.
10. Not allowing for delays in the transaction. In a perfect world, all
real estate transactions close on time. In the world we live in, transactions
are often delayed a week or more. Suppose you asked your landlord to terminate
your lease the day your purchase transaction was scheduled to close. A day or
two before your scheduled closing date, you discover your transaction is delayed
a week. In a perfect world, no one is inconvenienced and your landlord is
willing to work with you. More likely, however, your landlord is inconvenienced
and angry. Will you be thrown out? Will you have to find interim housing for a
week or more? The eviction process takes a little time, so the Sheriff won't
immediately remove you, but this type of stress-producing episode can be
avoided. How? Terminate your lease one week after your real estate transaction
is scheduled to close. That way, if there is a delay in closing your
transaction, you have some leeway. This approach might cost a little more, then
again, it might not.
