There are many financial mistakes that potential homebuyers make before shopping for homes. Here we’ll cover several.
The first is that they don’t properly set their expectations as to what they can truly afford. People walking into open houses with lofty expectations may fall short from an income perspective, at least temporarily deflating their dreams of homeownership.
The other end of this spectrum is the person who thinks he or she could never afford a home but, in many cases, can.
With rising home prices in many parts of the country, these are the people who you, as a real estate agent, need to reach out to now, before they are truly priced out of the market.
The second financial mistake that potential homebuyers make is underestimating how much money they will need beyond their down payments to close the deals.
Some of these costs may include closing-related expenses such as title fees and lender fees. Others are asset reserves, which in themselves may add up to several or more months’ worth of payments.
Of course, the buyer may receive seller credits to offset some of these expenses (that is, if the seller is inclined to give them).
Those credits may be less available in a strong seller’s market. This means that your buyer is going to have to come to the table with even more money than in a buyer’s market.
Someone who has been continuously employed for the past two years in the same line of work or something similar should have few issues getting approved from that perspective.
Where buyers run into issues, for example, is when they decide that they want to become self-employed shortly before they start the home-buying process.
This isn’t an ideal situation for someone who wants to buy a home quickly, as they have little or no history of earning income to show a lender while being self-employed.
The last topic we’ll cover, and probably the most important, is that of credit, or your buyer’s ability to manage their debt obligations.
Many buyers may be unaware of what their credit profile looks like or, if they are aware, what factors go into creating a good credit score.
Identity theft aside (and there is plenty of that going on right now), lenders are very interested in knowing how your buyers are managing their debt.
The first stop on any home-purchase journey for your buyers should be here, with a credit pull, which we can do for them.
While on the subject of credit, buyers may make the financial mistake of assuming, also incorrectly, that a credit repair service can step in and quickly remove all their late payments and collection accounts from their credit reports.
While some of it, meaning incorrect information, may be able to be removed, there is a good chance that the legitimate derogatory items will remain on the report. These will cause your buyer to have lower credit scores and, hence, pay higher interest rates.
If you have more questions about how to keep your buyer from making financial mistakes when planning to buy a home, please give us a call, and we’d be happy to answer them.