Home Finance Pitfalls

A feature article by an Alumbo member, Apr 10, 2008         

Here is a quick look at common financial mistakes to avoid when considering purchasing a new home: • Avoid having too much credit Having a bunch of different cards, school loans, and car payments can be just as bad as no credit or bad credit. Even if you pay your bills on time, lenders often focus on how much credit you have available to you. • Avoid making huge purchases before you look for a loan. Postpone any big purchases like a new car until after you buy a new home. • Make sure you don't choose the wrong mortgage. Please do your research! There are many different options out there, and lots to consider. Look at future interest rates, initial interests rates, and any prepayment penalties that might effect you. • Be sure that you understand the difference between "Pre-Approved" and "Pre-Qualified". Not all lenders apply the same meaning to these terms. The best advice is to ask how your lender defines each term and what additional steps will be required to obtain a loan. • Do not lie on your loan application. This is a federal offence! Also, never sign a loan application that is not entirely filled out, you don’t want you loan officer to stretch the truth either. • Definitely get a home inspection. Independent home inspectors are your best bet for finding any faults in the home you plan on purchasing. You want a satisfactory home, think of the cost of the home inspector as an investment for your future. • Avoid paying too much upfront. As a general rule, if a contractor asks for more than one third of the contract price as a down payment, you should be suspicious. Also, you should never pay a contractor in cash. • Be sure to get a good real estate agent to sell your old home. Look for someone who specializes in your area, and are labeled as top producers, make sure you shop around. • Once you have made your last payment, keep your mortgage. Keep all of your loan documents in a safe place.

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