Common Financing Problems and How To Overcome Them
Unfortunately, many real estate agents get a bad rap when it comes to helping you find the best home for your needs.
Too many realtors do not treat prospective home buyers with the utmost respect. They may pressure you to look at homes outside your price range, or disregard your budget concerns by ignoring extra costs like repairs.
In the search for their dream home, many new homebuyers feel pressured to take on too much debt, which adds a lot of stress to what should be an exciting experience. In other cases, homebuyers don't know their credit score, or are otherwise unprepared to finance a home.
That's why it's critical to find an agent who understands your needs and has the knowledge to walk you through the homebuying process from start to finish.
Our team at Steele San Diego Homes knows firsthand how important it is to find a real estate agent you can trust. Our business is founded on the idea that every client's best interests should be held at heart.
Team Steele will walk you through the process, providing upfront knowledge on what to avoid, and how to overcome financing problems you may encounter.
It's important to us to not only take the stress out of buying a home, but also make it fun! If you're thinking about buying a home, read on for some of the most common financing problems -- and how you can overcome them.
Home Financing Trap 1: Overspending
Some mortgage brokers hope to concentrate prospective home buyers on just the mortgage payment, moving them vertically into higher-priced homes. Avoid temptation; consider everything besides the mortgage payment that you will have to find funds for:
Insurance (not just homeowners; you need life insurance, automobile insurance, and possibly long-term disability coverage)
Maintenance and repair costs
Homeowner Association dues (in some communities)
Overspending can sometimes occur simply due to cash flow problems. Suppose you get paid twice a month, on the first and 15th. Some months are longer than others, so that second paycheck has to stretch just a little bit farther than the first check. If you must pay more than half your monthly bills from the second paycheck, you will run into a cash flow crisis at some time (or multiple times) of the year.
Some expenses are monthly; some are quarterly; some are felt only annually. Budgeting can help you save in preparation for those annual and quarterly expenses, so you are not tempted to spend “extra” money on hand that really needs to be reserved to cover, say, an annual life insurance payment.
You can also avoid spending too much on a dream home in the San Diego market by taking advantage of low down payment programs, like the Conventional 97 or Fannie Mae HomeReady mortgage. Under these programs, you can put down only 3 percent of the mortgage value and finance the remaining 97 to 99 percent.
HOME FINANCING TRAP 2: Being Unprepared with Financing
Your San Diego real estate professional shows you your dream home. You are completely captivated, and want to make an offer. Yet you do not have financing already arranged; not even a preapproval. Another, better prepared couple swoops in and takes your dream away from you.
Before venturing out to look at a home for sale, or even before clicking through online MLS listings, get preapproved for a mortgage loan. This speeds the process by many days, helping you get closer to the finish line before you even start your search. It also will give you your budget so that you can feel confident that you are shopping for homes you can afford.
Know your credit score. Fair Isaac Corporation (FICO) keeps a constantly running tally of every American adult’s credit worthiness, and the higher your score, the more likely you are to get favorable mortgage loan terms (Many other companies track credit, as well). The score changes constantly, so do not get too wrapped up in trying to track yours. Just get a snapshot to know if you are in the 600s, 700s or — dare to hope — 800s (FICO tops out at 850).
HOME FINANCING TRAP 3: Ignorance is Not Bliss
Not educating yourself on all home buying costs will both surprise and hurt you. Closing costs can run into thousands and are not always rolled into the mortgage loan. A whole phalanx of professionals will be lined up waiting to be paid, too:
Home inspector (you may be asked to share costs with the home seller)
Recorder of deeds
Depending on how large a down payment you make, you may need Private Mortgage Insurance (PMI), which adds to your monthly costs. Other costs you may not be prepared for:
Third-party fees (title insurance, appraisal costs, couriers)
Homeowner association dues
HOME FINANCING TRAP 4: Not Gaining Wisdom
You can gain a lot of wisdom in a short time by preparing yourself for the home buying process early, even before you start your San Diego property search in earnest. The internet is, of course, a valuable learning tool, but only if you know the information is legitimate. Seek out reputable sources, like U.S. News & World Report, U.S. Department of Housing and Urban Development (HUD), and the Consumer Financial Protection Bureau (CFPB).
One of the easiest (and kindest) ways to get that vital education is by connecting with a real estate professional who you can trust. A realtor or real estate agent who knows you are determined to find your ideal San Diego home will not only work with you, she or he will answer every question you ask honestly and stay on budget. What seperates the Steeles from your average real estate agent is the serivce they provide. Please feel free to contact us at Steele San Diego Homes to learn more.