10 Mistakes A First Time Buyer Should Avoid
1) Many times a homebuyer will use the first agent they make contact with, it is highly recommended to interview several agents to find out their level of experience with VA Loans their years in the business, and to find someone compatible with you. An experienced agent can give you the needed guidance to make a smooth transaction.
2) Not all pre-approvals are created equal, many pre-approvals states that the loan office has reviewed all the information and based upon the review of buyer’s documentation have issued the pre-approval. Having a lender who uses the two underwriting systems in the industry (either desktop underwriting or loan prospector), is very important to ensure that once your loan has gone into underwriting there is not an issue that can cause a decline.
3) The VA loan is the only loan in which daycare expenses are counted in the qualifying ratios, and many times that question is not asked up front in the initial interview, so be sure to disclose any expenses that you may have for daycare, which should be included in the initial calculations. You don’t want to have that additional expense cause a problem when your loan gets into underwriting.
4) Many veterans have heard the term, “VA, no-no” which refers to “no down payment and no closing cost.
Asking the seller to pay your closing cost in a seller’s market may make your offer non-competitive against other offers. Ask your loan officer how to structure your purchase with the lender paying your closing cost to make your offer as competitive as possible.
5) Not all homes meet VA guidelines.
Working with an experienced, knowledgably agent will help review items that may fall into the category of health and safety issues, such as: mold, or structural issues with the foundation, and roofs that appear to not be water tight. Also if the VA appraiser needs to ensure that all electrical plumbing and heating is in good working order, and that no items are broken or are in need of repair. Also if you’re looking at condominiums you need to ask you agent to check and make sure that your condo is on the VA approved condo list.
6) When you initially start working with a loan officer, you should ask for a loan estimate, which will itemize all the closing cost that you are responsible to pay. There are differences between lenders in which some lenders charge processing and underwriting fees (up to $1,500) on their VA loans, but most do not. With the loan estimate you will know exactly what your total payment is including taxes and insurance.
7) Even if the seller or lender is paying your closing cost, you still need upfront money to work with in a transaction. An earnest money deposit is required at the time of acceptance of a contact, this can be as little as $1,000 up to 1% of the purchase price. This money may be refunded to you at the closing. Be prepared to pay an upfront fee for the appraisal of $600, and approximately $400 for a home inspection.
8) Many first time home buyers who are short on funds may wish to eliminate their home inspection in order to save the $400, this normally is not recommended because the home inspection will find hidden defects and any needed repairs or maintenance to the property, without this knowledge could be very expensive after closing.
9) Before writing an offer ask your agent to review the most recent sales in the neighborhood to determine the price you’re offering is fair market value, and that the VA appraiser could come up with the same value. Otherwise if the home is overpriced, you could be spending money on an appraisal and a home inspection up to $1,000. The appraisal could come in less than your contract price and if the seller is not flexible to reduce the contract price to the appraisal value your contract could be canceled, and you would lose the money you spent on the appraisal and the home inspection. In this situation you could loss up to $1,000 by not doing a few minutes of research.
10) Many transactions close in 45 days, conversely most sellers would like to close their escrow in 30 days, most buyers never ask their lender what their capacity is to close a transaction in 30 days.