Avoid These 10 Mistakes Brooklyn Homebuyers Make
When buying a home, you want to avoid these ten mistakes that Brooklyn homebuyers make. The home buying process can be confusing if you do not have a real estate agent with the experience to guide you.
You need to understand that the home buying process should start well before you are ready to go out and look at homes. Saving money and monitoring your credit score will set you up for a smoother experience.
Like you would build a home on a solid foundation, you need to plan your home purchase with a solid foundation.
As a Brooklyn homebuyer, you can hire an agent to work on your behalf. This is called a buyer’s agency. The buyer’s agency provides the buyer with an advocate representing their interests in a real estate transaction.
Working in the Brooklyn real estate market for over 30 years, I have helped Brooklyn homebuyers avoid these ten buying mistakes.
1. Ignoring their credit rating.
Your credit rating is one of the primary considerations that a lender will use to determine whether you qualify for a home mortgage. It may also affect the amount of mortgage you can obtain. Therefore, it is important to look at your credit report periodically to review your credit score even before starting the homebuying process. In addition to your credit score, be sure there isn’t something on your credit report that doesn’t belong to you. If your credit rating is low, you will need to work on improving your score. You should consult with a financial professional to find out how to improve your score and how long it should take. You can learn more about understanding your credit score here.
2. Skipping the pre-qualification step.
A pre-qualification from a reputable lender is a crucial step for Brooklyn homebuyers. A lender will determine the amount of a mortgage you could qualify to borrow. They will look at your credit score, your income, and your current debts. Most loan programs establish an acceptable debt to income ratio. 28% of your monthly income is a good rule of thumb for housing expenses, including principal, interest, taxes, and insurance. When adding your additional debt payments, a lender generally likes to see the total not exceed 36% of your gross income. Each loan program has established its debt to income ratios, so it is essential to speak with a lender. Your mortgage payment in addition to principal and interest, but also taxes and insurance. Looking at homes in the wrong price range will waste your time if you can not afford to purchase at that price point.
3. Insufficient Savings Accounts.
Brooklyn homebuyers will need to have some cash saved to purchase a home. Even no money down advertisements doesn’t necessarily mean you won’t have to spend money in the homebuying process. We will talk about closing costs below, but you will also have the expense of inspections, moving, and purchasing necessary items for the new house. If you can increase your down payment, you may be able to save on your monthly mortgage payments. It is also important to have adequate savings available to cover any unexpected repairs or replacement of major components of the home.
4. Making a large purchase before closing.
I have seen homebuyers go out and purchase furniture for their new home on credit before closing. Another significant ding to your credit is buying a car right before you close on your home. You should wait until after you have completed your home purchase because the lender will do a last-minute credit check to make sure there were no significant changes to your credit score. A major purchase on credit could change your debt to income ratio that we spoke about earlier. If your debt to income ratio would change significantly, it could disqualify you for your mortgage.
5. Misunderstanding closing costs.
Closing costs cover a lot of different fees that are required to purchase a home. Average closing costs can run between 3% and 6% of the loan amount. The types of closing costs you will pay include lender fees, attorney fees, municipal and state fees, homeowner association fees, and inspection fees. There are loan types that allow the seller to pay a portion of the buyer’s closing costs, but there may be a limit to the amount the seller can cover, which may not cover all costs. Asking the seller to provide a closing cost credit would be part of your negotiations, and you should consult with your lender to be sure it will be acceptable. Many of the closing fees are set on a flat fee or a percentage of the sales price. Bargaining a lower price for the closing costs isn’t possible on most of these expenses.
6. Overlooking repair items.
The excitement of finding your dream home may cloud your judgment on the actual cost to repair things that come up in a home inspection. If there are items in the inspection that you agree to take care of after closing, be sure to get an estimate on what that type of repair will cost you. Sometimes the buyer will think it is an inexpensive item to fix, but once the contractor starts work, the problem is more extensive and more costly than previously thought.
7. Buying a house you can’t afford.
Just because a lender will loan you the money doesn’t mean it is wise to borrow the maximum amount. Consider your lifestyle when you decide how much you want to spend on your home. If you enjoy taking vacations, owning a car, or going out to eat, you may want to spend less on your monthly mortgage payment so that you do not have to sacrifice the other things you love.
8. Ignoring hidden costs of homeownership.
There are other expenses related to owning a home that you may not have considered. One is higher utility bills. If you rent or own a smaller house than you are purchasing, you may be paying less for utilities than the new larger home will cost you. You may also have to pay for additional utilities you are not currently paying, such as trash removal or recycling. Costs related to your mortgage also need to be considered. Your mortgage company may or may not collect amounts for taxes and homeowner insurance. If they do not, you will need to reserve these amounts to pay when they become due. Some other costs to consider are outside maintenance, inside maintenance, and the tools required to accomplish the job. And lastly, don’t forget the cost of furniture to fill your space and updates you want to make.
9. Not researching the neighborhood.
Although your real estate agent will share with you what they know about the area, it makes good sense for you to do your research. Is there any development being planned that might affect the neighborhood? What is the community like at different times of the day? I usually recommend that my Brooklyn homebuyers visit the area at various times to get a feel for what goes on throughout the day.
10. Believing that working with the Listing agent will save you money.
The listing agent’s fiduciary responsibility is to the seller. They have signed a contract with the seller to represent their best interest. Essentially, working with the listing agent does not give you an advocate. As I mentioned earlier in this post, the buyer’s agency agreement creates a fiduciary relationship with a homebuyer and the agent. The agent representing the buyer is bound to work in the buyer’s best interest. Wouldn’t it be great if you could have that kind of representation when you made other significant purchases?
As you can see, these mistakes could affect your ability to own a home or cost you considerably after you have purchased the home. Learn from someone else’s mistakes and avoid repeating any of these. You should have a much better buying experience.
Hiring the right agent to work on your behalf is an essential step in the home buying process you don’t want to skip. Check out this past blog post that explains the buying process for you.
As the quote by Stephen Keague states, “ Proper preparation prevents poor performance.” The home buying offer process can be very competitive. When Brooklyn homebuyers spend the time to prepare correctly, they make their dream of homeownership come true!
Contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. As a Brooklyn real estate agent with over 30 years of experience, I can help Brooklyn homebuyers navigate the homebuying process.
In the event our office is shut down; we are always committed to your safety during the COVID-19 health crisis in compliance with the State of New York public health policies. I can be reached by phone at (718) 253-9500 ext. 1901 or by email at [email protected].
