Inspection vs. Appraisal
Many people wonder about the difference between a property appraisal and an inspection, and how each is used during the home buying process.
An appraisal is a formal assessment of the value of a home or property. When you are seeking financing, the lender usually requires an appraisal to ascertain the value of the property in order to make sure the loan amount does not exceed the value of the property being sold.
An inspection is an assessment of the systems and structural integrity of the property. It's normally ordered and paid for by the buyer at the time of inspection to find any hidden problems with the property. An inspection is often written into the Purchase and Sales Agreement as a condition of the sale.
Top 5 Mistakes Home Buyers Make
1. Waiting to Sell Your House:
Since the housing market is slowing, it is more important than ever to sell your existing home before you commit to a new one. In the current environment, it is going to take you longer to find a buyer than it would have just a year ago. If you don't start showing your home until after you have signed a contract for a new place, your are taking on the added risk and stress of carrying two mortgages for an extended period of time.
The only way to know how much your home is really worth is to see how much someone is willing to pay for it. If you have overpriced your home you will know it within the first 30 to 45 days of putting it on the market. How? You won't get any or many offers. You must have a realistic picture of how much your home is worth, and then you must adjust your budget for your new home accordingly.
2. Ignoring Your Credit Score:
Get a copy of your credit report as soon as you decide to buy a property. Nearly 80% of them contain some type of error and 25% of those mistakes are serious enough to pull your credit score down, which has the potential to disqualify you for most competitive interest rates on a mortgage. How much can your credit score affect your loan? Look at this example: A person with a credit score of 640 would pay one interest point higher than a borrower with a score of 740.
By getting a copy of your credit report also, affords you the opportunity to discover and settle any delinquent accounts. You may have a small bill on your account, like a 50 or 60 dollar doctor bill, that you don't know was turned over to a collection agency. Once you find a problem on your credit report, We can help you fix that problem. Our representative are trained to help you repair your credit if that is necessary.
3. Skipping the Mortgage Pre-Approval Process:
The days of low teaser rates and easy money are long past gone. In today's tight lending environment, it is important to shop around for a mortgage and get pre-approved by a lender before you start visiting open houses. Borrowers, even ones with very low credit scores, had hundreds of options just a couple of months ago, unfortunately that is not the case anymore. Many lenders have stopped underwriting riskier loans in favor of more traditional fixed rate mortgages.
By getting pre-approved, you will get a realistic picture of the type of financing available to you, you'll have a better idea of what your interest rate will look like, and you'll know how much house you can afford. Interest rates are per borrower based on your credit picture. For example someone with excellent credit could qualify for a 7.5% interest rate on a 450,000 loan and another borrower with a closer to average credit score could get and 8 or 9% rate.
4. Not Budging On Your Budget:
Buyers have more negotiating power than ever. Don't be afraid to make an offer that is well below the asking price. Once you find a home your really love and your negotiating on price, you'd be foolish to walk away from that property over just a few thousand dollars. This really applies if you're borrowing the money to buy that home. For example, On a monthly basis, and extra $10,000 (on a loan valued less than $417,000) will cost your just $63.
5. Signing a Contract With Contingencies:
It isn't enough to secure financing and find a place that you are comfortable calling home. You also need to find a seller who is ready to move quickly. This means avoiding people who want to include all sorts of contingencies in the selling contract that would allow them to stay in their house for an extended period of time. One situation you want to avoid for example is when the sale is dependent upon the seller finding a new home first. What could happen in this situation is that you wait around for months and the interest rate lock on your mortgage expires. When that happens, you would actually be spending more money for the same house. Or the deal could fall apart all together, putting you back to square one, looking for another property.
