Looking at the mortgage rate chart and comparing that with the house prices chart, it dawns on you that the rate at which mortgage rates are going up is much more than the rate at which house prices are going down. So, now you decided that no matter what, THIS IS THE FINAL SUMMER in your apartment complex. No more shoveling of the snow from your car this winter. You’d rather clean the driveway of your first home. No more small get-together at friend’s place this Christmas. You’d rather have a big Thanksgiving Dinner at your own home. You are excited. What next? Find a good home and make sure, you do not do the following:

10. No more new car purchase at 1.95%!
Yes, I know the excitement. New home, new garage and new driveway. There should be a new car, too, right? Wrong! Buying a car would greatly increase your debt to income ratio and you may not qualify for the amount of loan you were expecting to purchase your first home. Planning to buy the car outright? This may reduce the amount of down payment you will make for your first home, increasing loan to value ratio – with a possible PMI kicking in, increasing your monthly payments. Well, you can extend this concept to any new major purchase through financing.

9. Buying from a home through ‘Sale by Owner’? Where does the earnest money go?
You can easily avoid this mistake if you are working with an educated and knowledgeable real estate professional. But if you come across such a situation, make sure, you write the escrow check to the order of a trust or third party account. That could be, your agents company’s escrow account or could be seller’s attorney’s account. But never, never, never seller’s personal account.

8. Not inspecting the home.
It’s been assumed that relatively new homes do not need home inspection. Not true. Before you move ahead with the commitment to buy a home, make sure, home is sound structurally. And, if you are a first time home buyer, you want to know everything about the home you will own very soon. So, do not try to save money on the assumption that the home you are buying is perfect. And make sure you have a written report of the home inspection before you proceed to the purchase and sale agreement. (Well, now a days, you can get the report on the CDs and some of them makes it available on the internet!)

7. Not be-friend the seller.
Sometimes, being too friendly with the seller might raise expectations from both sides. When these expectations are not fulfilled, the transaction turns bitter. Sometimes, resulting into broken verbal promises and
Take it with a pinch of salt – until closing is over and the seller becomes ex-owners of the home, the friendliness can remain in the background. After all, it’s professional deal.

6. Forgetting about Home Owner’s Insurance.
There will be several reminders from your mortgage company about this. The closing may not take place until home insurance binder is available at the time of closing. It may not take more than just a phone call couple of days prior to closing. But I have seen the last minute rush for the home insurance. Though, if you are working with a Realtor® who will remind you about ’10-DAYS TO CLOSING’ schedule, you will have no problem. And, make sure, if you have sufficient time, you shop for better rate!

5. No job-hopping!
This is something you should be very careful about. Say, you have a steady job with a company. Your offer for a beautiful home is negotiated and finally, accepted. Now, you find an excellent opportunity in a different field at which you are good, but is still new to you. You do not want to let this opportunity slip off your hands. A lender wants to know your job history and wants to make you have a steady source of income. This will assure the lender that you are not a ‘risky’ proposition for them.

This does not mean that you cannot change a job when you buy a home. If you join another company at a better pay than your previous job, and a new job in the same field is not considered unsafe for the lender.

4. Never sign an agreement that you don’t understand.
This agreement could be between you and your lender or between you and the seller - Or between you and your agent. Understand the details of this agreement and make sure what your liability is. You may end up borrowing money that has a pre-payment penalty. You may not be able to put inspection related issues in your purchase and sale agreement or you may pay more than what you need to pay to your own agent. In all cases, do not sign the agreement if you did not understand it – even a small part of it. If need be, hire an attorney to review all these documents – especially, the purchase and sale agreement. And an agreement between you and your attorney for the payment of his/her fees? Well, ask the attorney to clarify all the terms and conditions.

3. Working with professionals who do not understand that TIME IS OF ESSENCE.
It was difficult for the buyer to understand why the attorney is taking forever for reviewing the purchase and sale agreement. It was very well known fact to the attorney that the buyer had to sign this agreement in just few days. The deadline came and went. Buyer had to make a decision – should they wait for the attorney to review the agreement and suggest the changes, missing the deadline or go ahead with the deal.

Sometimes, working with the best Realtor® may not help you much. Make sure you work with the real estate attorneys, home inspectors and lenders that understand that time is of essence in all real estate transactions. Or else, get ready for a battle to recover the earnest money.


2. Re-negotiate price based on inspection
You may end up losing a home if this happens. Sometimes, trivial inspection issues are magnified by some home inspectors, as they want to serve the buyers. Though, there has been instances where sellers have worked together to adjust the price when a major repair is involved.

Simply put, sellers do not like this and unless you are lucky and/or working with a good Realtor®, chances are, you will have to start the search of your home from scratch. Déjà vu.

1. Not working with a Realtor®
This is the most important piece of this puzzle. It’s like using home remedies when you are not well and avoiding a visit to the doctor, even though you have insurance coverage and at most, it might cost you the co-pay only. Not using professional services for one of the biggest investment is a serious matter. I have not been able to understand why many first time home buyers venture out on their own and face the music – or noise. The real estate transactions are not simple and are getting more and more complex – with new laws and requirements. Why do you want to risk your happiness when you are about to start a new life? Just make sure, you pick up the right Realtor® for your needs. And see how smooth the transaction is.

If you want to know all these reasons in detail what NOT you should do when you are ready to buy a home – now, send me an email at Praful@iPraful.com or visit my website at http://www.iPraful.com.

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