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Ten Things To Avoid
Most of the advice given to home buyers and sellers tells you
what to do, but many do not include the common mistakes that can derail your
plans. Here is are ten most common ones that you need to watch out for while
buying, owning, or selling your home.
Don't:
Choose the Wrong Mortgage: With the advent of instant refinancing,
home loans are no longer the lifetime obligations they used to be. Still,
you don't want to be saddled for even a short period of time with the wrong
one. Investigate all your options, then lay your choices side-by-side and do
the math, making sure to compare worst-case scenarios. Be sure to look at
initial interest rates, future interest rates and payments (if different),
and the possibility of prepayment penalties.
Confuse "Pre-Approved" and "Pre-Qualified" with a Loan Commitment:
These are debatable terms in real estate because not all lenders apply the
same definition to each expression. In fact, one leading real estate
dictionary contains neither expression because their definitions are
uncertain. According to one school of thought, however, when you are
"pre-qualified," the lender is making an educated guess about how much you
can borrow based on information you've provided. When you are
"pre-approved," the lender has verified everything you have told him or her
and is offering to lend you up to a given amount at current interest rates
- under certain conditions. Whether pre-qualified or pre-approved, final
clearance and a check at closing - a loan commitment - are subject to an
appraisal satisfactory to the lender, good title, a last-minute credit
check, and other verifications. When meeting with lenders, always ask how
they define each term and what additional steps will be required to obtain a
loan.
Have Too Much Credit: Excessive credit is almost as bad as no credit
or even bad credit. Even if you pay your bills on time, lenders tend to
focus just as much on how much credit you have available to you as they do
on
timeliness. So being up to your ears in car loans and credit cards is a sure
way to be turned down for a mortgage. Postpone any big ticket purchases
until after you buy your house.
Lie on Your Loan Application: Exaggerating your income on a mortgage
application or putting down other untruths can be a federal offense. Lenders
rarely prosecute liars. But if they find out later, they can call your loan
due and payable. Don't ever sign your name to a loan application that is not
completely filled out, either. Loan officers have been known to stretch the
truth to get a client approved, but it's the borrower who ends up paying the
price, often in the form of monthly loan payments he can't afford.
Hide If You Can't Make Your Payments: The worst thing you can do is
ignore phone calls and letters from your lender when you are behind on your
payments. Lenders have many options at their disposal to help keep borrowers
from losing their homes to foreclosure. But they can't do anything for you
unless they can talk to you about your difficulties. Lenders are the enemy
only if you give them no other choice.
Skip a Home Inspection: Failing to make your purchase contingent on a
satisfactory home inspection could be a costly mistake. Independent home
inspectors examine houses from stem to stern. They'll be able to tell you
whether the roof and/or basement leaks, whether the mechanical systems are
in good shape and how long the appliances should last. They can't report on
things they can't see, but at least their trained eyes are better than
yours. So don't pass just to save $300-$400; that's money well spent.
Hire Just Any Agent to Sell Your House: All real estate agents are
not the same. You want to look for those who specialize in your neighborhood
and are top producers. Ask your candidates how they plan to market your
house, what you can do to make the place more attractive to prospects and
how much you should ask. If you don't like any of the answers, looks
elsewhere. And above all, stay away from relatives. Unless Aunt Bessie or
Nephew Nick fit the description above, keep looking.
Fail to Check Out a Remodeler: Never, ever hire a contractor who
knocks on your door or says his prices are good for only a few days.
Reputable remodelers don't solicit door-to-door, and they don't cut prices
just because they happen to be in your neighborhood. Check out a potential
contractor thoroughly by calling several of his past clients, your local
better business bureau, his bankers and suppliers, and your local consumer
affairs agency.
Pay Too Much Upfront: If a contractor asks for more than a third of
the contract price as a downpayment, chances are something's wrong. At
worst, he's a scam artist who has no intention of returning after he cashes
your check. At best, he's undercapitalized and can't afford to purchase
materials on his own. Or, in between, he could be using your money to pay
workers on another job. Never give a contractor cash, either.
Burn Your Mortgage: It's a wonderful feeling when you make your last
house payment. After all, the place is now yours, all yours. Many people
celebrate by holding a mortgage burning party. But they torch the original
document. Don't. Make a copy and burn that instead. Keep all your loan docs
in a safe place.
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