It’s so tempting to go on a shopping spree when you are buying a Windsor house. You probably needs new furniture, maybe some new appliances and lots of items to decorate your new property. But wait! Don’t go crazy buying anything large or making any big financial purchases while your home is in escrow.
Believe it or not, and we have seen this over and over, buyers can lose a home if they make spend any money that changes their debt to income ratio. They go and open new credit accounts at furniture or home improvement stores, and it changes the whole ball game. So take our advice and don’t do any of the following while you are buying a home.
1. Don’t close accounts. You may pay them down or pay them off, but don’t close them. It looks like you have less available credit.
2. Don’t open new accounts: Again, don’t buy the furniture just yet. Also, it has been done where buyers will buy a car to celebrate, never thinking that it could disqualify them from their house.
3. Pay your bills on time: Don’t make the mistake of paying your bills late. It could really change your FICO score. Again, one moment you can qualify for a house, the next, you can’t.
Remember, buying a home is not just about making the mortgage payment. It involves so much more. Buyers should always prepare themselves when creating a budget, as there are many expenses you probably are not aware of if you are a first time homebuyer.
1. Insurance: You will need mortgage insurance, as you can’t buy a home without it. Shop around and find comparable rates. One money saving cost is to bundle your homeowner’s insurance with your auto insurance. You can get a better deal.
2. Taxes: You can’t avoid these either. This can add to your mortgage payment, so when looking for a home, make sure you ask about taxes. Also see if they increase regularly.
3. Homeowner’s association fees: If you are buying a condo or moving into a subdivision, you may have to pay HOA fees. Some are inexpensive, while others can be quite costly.
This is often a big shock for those moving from smaller homes, like an apartment, into larger homes. Heating, air-conditioning, electric, water and other bills can create large monthly payments that may leave you scratching your head. If you find this has happened to you, contact your local electric department or look online on how to save money on these costs.
5. Maintenance: From yard work, repairs, upkeep and other projects, you will be spending money on maintenance. And repairs always happen when you least expect it. It never fails that an appliance will break down during the holiday season when your budget might be more fragile. Set aside money each month for these unexpected expenses. Will your mortgage payment allow you to save money? If not, you may want to find a less expensive home.
I strongly encourage all of my clients to get a pre-approval letter before buying a home. It can save you so much time, stress and yes, money. When you get a range on the price of a home you can afford, it really makes it easier for yourself and your real estate agent. This way, you won’t find a home that exceeds your budget, it serves as a valuable piece of paper if you are in a bidding war with another buyer on a property and they don’t have a pre-approval letter. Sellers like to know that the buyers making an offer can afford it and not wasting their time.
A suggestion when shopping for a home with a pre-approval letter. Start looking at properties at the bottom of your range. If you can’t find anything, or if you don’t like the quality of homes, then expand your search and increase your budget by $10,000. In other words, if your limit is $250,000 on a home, start at $175,000 or so. Then increase it to $185,000. Don’t automatically start looking at homes at $250,000. It’s much easier to move up when looking at homes, than to head down.
Again, getting your financial house in order is a good way to get your house hunting off to an excellent start. The last thing you need are any surprises that can disqualify you from buying the home of your dreams.