2 Tips to Minimize Unpleasant Surprises When Buying Your First Home
There are a lot of steps involved in purchasing a home, so it's not surprising that sometimes unexpected problems crop up at the worst times. While you can't account for every possible thing that may go wrong, here are two things you can do to minimize major issues that could stop the homebuying process in its tracks.
Get Pre-Approved by a Second Lender
It's easy to think once you receive a preapproval letter from your lender of choice that the funds will be available when you need them, but that's not always the case. Lenders can and do cancel approvals, typically when there's been an undesirable change in an applicant's financial status that makes the loan too risky to cover.
You can avoid this by staying on top of your bills, not opening new credit accounts, and monitoring your credit report throughout the process. Another thing you can do is get a second (or even third) preapproval from a different bank as a backup in case your preferred bank changes its mind about giving you money.
A benefit to applying to multiple lenders is you might get a lower interest rate than you expected. If the lenders see that you're shopping around, they may offer to reduce the rate to get your business. And don't worry, your credit won't be hurt by applying to more than one bank. Credit reporting agencies typically count credit inquiries from multiple mortgage lenders within a short period of time as a single inquiry, so your credit score shouldn't be affected.
Set Aside Money for Repairs
While the home may be new to you, chances are good it's a few years old. This means there are things that may need to be repaired or replaced sooner than expected. Homeowners insurance and home repair plans may not cover what needs to be done, so it's important to set aside money to pay for problems that may crop up during your first few years of ownership.
This is particularly important if you live in an area affected by climate change. Your home was probably built to withstand certain elements but changing weather patterns may bring new issues your home is not prepared to deal with.
For instance, if the weather used to be mild but the summers have been getting increasingly hotter and dryer, you will want to make sure your roof has an adequate fire-resistance rating or install thermal windows that'll make it easier to regulate the temperature in your home.
If you're having difficulty pulling together a savings fund, talk to your lender about getting a mortgage that is a bit larger than the purchase price. Some banks will give you extra money depending on what it will be used for (e.g. home repairs) and just add it to your mortgage, so it doesn't hurt to consult with your mortgage consultant about this option.
For more information about getting a loan for your first home, contact a real estate loan lending program.