Homebuyer Mistakes – Part 1

The biggest mistake that potential homebuyers make is to assume that they can’t buy a home, that there are barriers they cannot overcome. There are some for whom this is true, but there are many people for whom those barriers are imaginary. Let’s discuss in more detail.

First some statistics! Homeownership is at an all time high with over 67% of Americans now owning their own homes. Current housing sales statistics show that the housing market is very active with over 6.5 million re-sales this year. Add the new home construction of 1.9 million and it is obvious that lots of people are buying homes. Why not you too?

In addition, the mortgage lending industry has made a significant commitment to expanding homeownership opportunities. It is the industry policy to reach out to people who have been “under-served” in the past. More specifically, it has loosened the criteria for qualifying so that people who, indeed, would not have been able to buy a home are now able to do so.

It used to be that you had to have a 20 percent or 10 percent down payment, but that is no longer true. No down payment loans are available, and programs are even available to cover closing costs. The programs with the best pricing, however, require that the borrowers have demonstrated the ability to save some money. As a homeowner, it is always desirable to have some reserves for the unforeseen circumstance.

As to qualifying, the old rules said that no more than 36 percent of gross income before taxes could be used to service housing cost and recurring bills. The new criteria are more lenient with many loans being approved today that would not have been several years ago.

Third, it is not necessary to have pristine credit to buy a home. No one wants to lend to someone who is an obvious flake, but a history of some credit problems is not a barrier. Many programs are specifically designed to work with people who have had credit issues in their background.

The next step should be to find a lender to help get you pre-approved for a loan on a home that is in your price range. Be sure to find someone with experience. A brand new loan officer just may not be familiar with the programs or how to make you fit into their requirements. Ask your associates at work or friends who are homeowners for recommendations in getting to a lender who can analyze your situation and help get you into a program that fits your needs and goals. Then interview those with rave recommendations.

The goal should be to be armed with a letter that says you have been approved. At that point, all you need is a purchase contract, a preliminary title report, and an appraisal and you are ready to go. When you know that you can get a loan you will be amazed at the power you will feel!

In coming weeks we will talk about other mistakes homebuyers make, including assumptions they make that are not true, and strategies they use that are ill conceived.

Finally, I cannot stress enough the importance of getting an education about home buying and mortgage financing. Get one on homebuying and, of course, I would recommend that you buy my book on financing. Experts have described it as “the best book ever written about home financing.” It is available at bookstores, on-line, or at my other website www.loan-wolf.com .

As a sage once said, “Be bold, and might forces will come to your aid!”

True enough!

Please print this article and give it to an aspiring homeowner, or better yet, forward it to him/her via e-mail..

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