Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
For many homebuyers who are pursuing their first home purchase, countless hours will be spent researching all the available homes and statistics in their desired market. They will go to great lengths trying to educate themselves about a complex process that they are highly unfamiliar with, and might not ever learn about until it’s too late or too costly. Despite the vast availability of real estate and mortgage information online, most first-time home buyers often make the same common mistakes when they actually find the home to which they want to give serious consideration. By learning about some of these common blunders, novice home buyers can take steps to avoid them, which will often result in a cheaper, quicker, or easier overall home-buying experience.
Jumping in Without a Game Plan
While for some it can be intimidating to get pre-qualified for a home mortgage, and for others the premise might be taken completely for granted – the right prequalification is more important than ever. The pre-qualification process helps buyers learn about the maximum loan amounts, minimal down payments, and other financial determining factors to be considered for their specific circumstances.
Home buyers need to think about short-term and long-term financial conditions before they commit to a payment amount that merely suits their present needs. The real estate market continually changes, as does the economics and finances of individuals. Home buyers need to consider the fact that the payment they set now will be in place until the home is sold or the loan refinanced. Every buyer is different, every home is unique, and every situation needs a custom-tailored approach.
Not Fully Entrusting Their Real Estate Professional
Sometimes new home buyers end up hurting themselves by withholding important information or plans. Whether it’s the fact that they are willing to buy a house as-is even with some noticeable issues, or whether they would really go higher on an offer, or even if it’s something as trivial as their willingness to compromise on bedroom or bathroom count—being open and honest with the trusted professionals will always reap its benefits.
Trusting your real estate attorney throughout the transaction is critical. “Don’t get so emotional about a small problem that you end up walking away from a home that you really want,” advises Louis B. Chapman, Esq., a real estate attorney in Bergen County. Perhaps the seller is being unreasonable about something insignificant – warranted or unwarranted—keep your professionals in the loop about your real intentions. If you want to fully pursue a house even with some minor issues, be candid with your professional so they know how to work for you. “Keep your main objective in focus at all times,” adds Chapman.
Trading Short Term Gain for Long Term Pain
Many first-time homebuyers are overwhelmingly focused on obtaining the smallest monthly mortgage payment that they can get. While this is important, the mortgage payment alone is not the only expense associated with homeownership. It is important to ask for, and review, the seller’s current monthly housing expenses when considering what the most accurate payment will be for a certain house. What might look like a cheap “fixer-upper” initially may end up being a more budget-friendly home compared to a home that needs no immediate visual repairs now.
From the start, buyers should factor in funds needed for improvements and upgrades that they are not considering on day one, or have not been exposed as of yet. It might sometimes take between 12-24 months to cycle through the different seasons and stages of homeownership to truly know what updates and upgrades are needed.
At the same time, with interest rates still at historic lows, the cost of a slightly larger home or a more suitable house might be more affordable than most home buyers actually realize. As an example, a $25,000 larger mortgage with a rate of 3.75% will only add $115 more to a buyer’s monthly mortgage payment. On a 30-year fixed mortgage, that $25,000 increase will only add approximately $17,000 in extra interest over the life of the loan. Sometimes, increasing an offer by $20-30 thousand more can help a buyer get a great house versus a good house, or no house at all.
Negotiating the Wrong Way with Sellers
When buyers do eventually find that dream home, among the most important stages that first takes place is the price negotiation. Home buyers need to be aware that what may be just managing a budget to them is significantly more than that to the seller.
“Sellers are emotionally vested in their homes, and take the entire home-selling process very personally,” says Zeevyah Benoff, a real estate agent with Links Residential Real Estate. Presenting offers in the wrong way can literally cost home buyers thousands or tens of thousands of dollars – or prevent them from obtaining the house altogether.
Apply Before You Buy!
While these are only a few of the common factors for-first time home buyers to pay attention to, working with knowledgeable and experienced professionals will guide new homebuyers through any endeavor as they appear.
With the help of true professionals, a home buyer can obtain valuable information that can help them make a more informed decision when finding and negotiating the most successful new home purchase.
Working with a local direct lender, for example, might be able to give you an important edge that might address most of these items through a thorough consultation from the start. A proper prequalification and consultation can help a potential buyer avoid many costs and unnecessary frustrations throughout this process, even if a home is not yet identified.
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