Every home sale transaction has a lot of moving parts. Builders, lenders, inspectors, appraisers – anyone involved with the transaction—has their own guidelines and processes that need to be followed. With so many details to keep track of, it’s easy for home buyers to get tripped up.
Here are three common mistakes home buyers often make, and how to avoid them:
1. Not Disclosing Gift Money
If someone else is giving you money for a down payment, or to cover other costs, make sure you tell your lender ASAP. Lenders and their underwriting departments need to know exactly where your money is coming from—a salary, inheritance, gift or otherwise—so they can (hopefully) approve your loan. Even if the gift means you have more money in your account, your lender needs to know. Not disclosing a gift can delay your closing. Tell your lender as soon as possible about any money that will be given to you as a gift (from family, friends or anyone else).
2. Overindulging at the Design Center
When buying new construction, it’s easy to fall in love with the model. But outfitting your soon-to-be-built home with all of the same upgrades shown in the model can be trouble when it comes to appraisal time. If you’re getting a loan and your new home doesn’t appraise with all the upgrades you’ve added, you’ll have to pay for those snazzy fixtures, counters, lights and cabinetry out of your pocket. And if you’re trying to stay on a budget, that can be a problem.
3. Opening a New Credit Card Account to Pay for New Furniture, or Whatever
Everything’s going along smoothly with your home purchase, and you’re set to close in a few days. Opening a revolving line of credit at the furniture store so you can furnish your new home won’t be a problem, right? Wrong. Your file will likely go through underwriting one more time at the lender, and if a new credit card account throws your debt-to-income ratio out of whack, you may be in for a disappointment. Don’t open any new credit card accounts or incur any new debt (new car, etc.) until after you close on your home.
When it comes to buying a home, being overly cautious and over-communicating—with your Realtor, your lender and/or your builder—are good things. Don’t be afraid to ask questions. And don’t let a minor slip up bring major complications to your transaction.