Why Cash Buyers and Low Inventory Is Making Home Purchasing Difficult for Farmington Hills Non-Cash Buyers

Why Cash Buyers and Low Inventory Is Making Home Purchasing Difficult for Farmington Hills Non-Cash Buyers

A recent real estate market analysis found that nearly one-third of all home purchases nationwide were cash transactions between January 1, 2021, and April 30, 2021. Remember, what is happening nationwide reflects what’s occurring in the housing market on the local level. Adding that housing inventory is low in Farmington Hills, Michigan, it’s becoming increasingly tricky for non-cash buyers to get a foothold in the home purchasing race, never mind winning it, taking the prize of homeownership.

Tips To Beating Out Cash Buyers

So you’ve found yourself going up against cash buyers in purchasing that dream home. Don’t give up! There are several ways to get yourself on an even playing field when dealing with cash home buyers in Farmington Hills.

Increase Earnest Money Deposit

Earnest money is essentially a deposit put up in good faith that reserves your right to purchase the home. If you back out of the contract without reason, the seller retains the earnest money. Increasing your earnest money deposit shows the seller that you’re serious about buying their house.

Get Mortgage Pre-approval

Mortgage lenders typically offer fully underwritten preapprovals. Meaning they’ve run a credit check and verified your finances for your mortgage loan before bidding on a property. Pre-approvals give the seller an added layer of credence that you’ll follow through as a qualified buyer. Generally, the document required by a lender for pre-approval is proof of assets and income, optimal credit, and verification of employment, typically called a VOE.

Better Adherence To Seller’s Timeline

A seller’s goal is likely a smooth transition. However, keep in mind they too are making a move, possibly to a new home. Extenuating circumstances possibly command a quicker process, or they may require some extra time before vacating the property. Be agreeable when it comes to meeting the seller’s needs if you’re in the running with an all-cash home offer.

Appraisal Gap Guarantee

An appraisal gap guarantee guarantees that the home buyer covers the monetary gap between the contract price and the appraisal if it comes in too low. To overcome a low appraisal, a buyer pays the difference or renegotiates with the seller.

Go Above Asking Price

Cash buyers are notorious for going below the asking price, knowing a quick sale is enticing to some home sellers. A buyer has the option to include an escalation clause that automatically increases your offer to a maximum stated amount if a cash buyer outbids you.

Limit Contingencies

Limiting or waiving contingencies isn’t entirely without risk, but it shows the seller you’re willing to work with them to secure the deal. The financing contingency, inspection contingency, sale contingency, and appraisal contingency are items to consider waiving to simplify the home buying process. Keep in mind that waiving these items waives certain rights like an inspection, backing out of a contract, or renegotiating.

Buyers Seek Bigger Mortgages As Home Prices Continue to Rise

Buyers Seek Bigger Mortgages As Home Prices Continue to Rise

Buyers Seek Bigger Mortgages as Home Prices Continue to Rise: Over the past year, there has been a significant increase in home prices forcing home buyers to borrow more to keep up. The average size of a loan purchase rose to $411,400 last week, according to Mortgage Bankers Association, the highest since February. The average loan for a new home surpassed $377,000 last month, a record high.

Home prices are climbing at their fastest pace in more than 15 years. And while low mortgage rates are helping to offset some of those higher prices  – mortgage rates are predicted to head up soon. The 30-year fixed-rate mortgage averaged 3% this week, up from 2.94% the week prior, according to Freddie Mac.

Rising house prices put pressure on loan sizes 

“We’ve seen very red-hot house-price appreciation across the country—double digits nationally,” says Len Kiefer, deputy chief economist at Freddie Mac. “That puts pressure on loan sizes because, to purchase a home at a higher price, you’re going to need to borrow more money.” 

The MBA’s head of forecasting, Joel Kan, said the increase is partly due to the kinds of homes people are buying. The pandemic has led many newly remote workers to seek bigger houses in the suburbs, with more outdoor space. “These homeowners, typically, are still gainfully employed, might be higher-income, etc.,” Kan said. “They might be able to afford a little bit more.”

However, to get these larger mortgages, borrowers will need stellar credit to qualify.  The median credit score for new mortgages was 788 in the first quarter of this year, up from 773 during the same period last year. 

Supply shortages are constraining purchase activity

Mortgage applications to purchase a home fell 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was just 2% higher than the same week one year ago when the housing market was just starting to come back after the pandemic shut it down. 

Joel Kan, an MBA economist stated that “A decline in purchase applications was seen for both conventional and government loans. “There continues to be strong demand for buying a home, but persistent supply shortages are constraining purchase activity, and building material shortages and higher costs are making it more difficult to increase supply.”

The majority of Americans believe now is a good time to buy a home

Despite a surge in home prices, a majority of Americans believe now is a good time to buy a home, according to a new survey from Gallup. Some 53% of Americans believe it is a good time to buy, Gallup reported, citing the results of a survey of nearly 1,000 U.S. adults conducted in April.

Last year, only 50% of people felt this way, marking a record low since Gallup began tracking Americans’ sentiment on the housing market in the 1970s. At the time, people were responding to the sudden slowdown in real-estate transactions as the economy shut down at the beginning of the COVID pandemic.

Demographic shifts and the pandemic-fueled move to remote working caused demand among home buyers to rise. As people rushed into the market and quickly bought up properties, the inventory of available homes for sale has dropped to a record low in recent months.

Americans believe home prices are going to increase over the next year

To an extent, this inventory supply gap is a reflection of years of under-building following the Great Recession. The Gallup survey also found that 71% of Americans believe home prices are going to increase over the next year in their local market.

Expectations of rising home prices were essentially the same across the U.S., regardless of whether the survey respondents lived in a major city, suburb, or rural area. 

Nevertheless, Americans continue to prefer homeownership to other long-term investments. Gallup found that 41% of people believe real estate is the best long-term investment, up from 35% last year.  

Partner with Highly-rated Farmington Hills MI REALTOR -Tom Gilliam

Whether you are interested in Farmington Hills MI homes for sale or it’s time to list your current property, experience matters most in a changing market. Serving Farmington Hills and the surrounding area for over 20 years, Tom is able to provide his clients with the kind of knowledge, skills, commitment, and personalized service they need and deserve.

Tom is down-to-earth and someone you can trust and feel good about working with. His clients appreciate his honesty and transparency and feel it helps them as they make important real estate decisions. Tom makes himself available to his clients whenever they have questions or concerns and promptly returns any texts, calls, or emails.

Farmington Hills MI Homes for Sale 

As your Farmington Hills MI real estate agent, Tom will protect your best interests, advocate for you, handle all the details of the transaction,  and do whatever is necessary to ensure the best results possible. Having a trusted professional like Tom by your side means there is one less thing to worry about. To find out more about buying or selling real estate in Farmington Hills MI, or homes in the surrounding Oakland County area, please give highly-rated Farmington Hills MI REALTORⓇ – Tom Gilliam a call directly at (248) 790-5594 or send him an email.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Farmington Hills MI Real Estate

 

 

 

Buying a Home in Farmington Hills MI: Home Inspection Tips

Buying a Home in Farmington Hills MI: Home Inspection Tips

 Buying a Home in Farmington Hills MI: Home Inspection Tips

Buying a home in Farmington Hills MI is a lengthy process, and will likely be one of the biggest financial decisions you make in your lifetime. Even if you find a great deal on the cost of a house, there are several other fees that will sneak in such as private mortgage insurance, closing costs, broker fees, etc. 

Hence, you might be tempted to forego the home inspection, especially since it’s one more cost added to the pot. Even if your prospective home looks immaculate, you should still get an inspection because it could potentially save you thousands of dollars and aggravation down the road. 

What You See May not be What You Get

When looking at Farmington Hills MI homes for sale, what you see may not be exactly what you get. Most sellers are going to have their home looking its best for prospective buyers. You may “see” attractive pots of colorful flowers on the front porch, freshly painted walls, attractive granite countertops, gleaming hardwood floors, and other touches that catch your eye. 

What you won’t see are things like cracks in the foundation, antiquated plumbing, dangerous wiring, appliances that don’t work, or other hidden issues that might only get revealed by hiring a professional home inspector.  

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A qualified Farmington Hills home inspector’s job is to assess the condition of the property, including its heating and cooling systems, plumbing, electrical work, water and sewage, and some fire and safety issues. The inspector will also look for evidence of insect, water, or fire damage or any other issue that may affect the value of the property. 

When The Home Inspection is Done

Typically, a home inspection is done after a sales contract or purchase agreement between the buyer and a seller has been signed. Therefore, it’s important that the contract include an inspection contingency or due diligence contingency, which allows the buyer time to find an inspector, schedule and attend the inspection, receive the inspector’s report, and decide how to proceed based on the information it includes. 

It’s a good idea to choose a home inspector early in the home buying process so you can schedule your inspection as soon as a seller accepts your offer. Good inspectors can be in high-demand, especially in the springtime when the majority of homes are sold. 

You should also budget for additional examinations in case the inspector finds problems or mentions issues that need further investigation, such as mold,  asbestos, or additions made without a permit. Whether the seller will give you more time to complete additional inspections is subject to negotiation. It’s up to the seller to agree or not.  

Preparing A Home Inspection Checklist  

You can prepare for the home inspection by making a list of the areas of the house you want to be checked before the inspector arrives. The following items should be included on your checklist:

  • Foundation
  • Roof
  • Attic space
  • Rain gutters and downspouts
  • Exterior stucco or paint
  • Electrical panel, light switches, and power outlets
  • Thermostats and heating, cooling, and ventilation (HVAC) system
  • Plumbing fixtures, faucets, and water heater
  • Appliances
  • Walls, ceilings, and floors
  • Doors and windows
  • Stairs, steps, and railings
  • Walkways and driveways
  • Porches and balconies
  • Basement
  • Garage

A professional Farmington Hills MI home inspection will likely take at least a few hours, and it’s a good idea to be present during the inspection if you can. That way you can find out as much as possible about the true condition of the home and ask the inspector about any findings that might concern you.

Additional Items To Consider

Keep in mind that since home inspectors are mainly concerned with the physical components of the property, there may be items about the home that are left out of the inspection, such as trees and landscaping, lawn sprinklers, sewer line, fireplace and chimney, swimming pool equipment, floors covered by carpeting, drainage, mice, rats, or other rodents, and wood pests such as termites or carpenter ants.

Inspectors typically won’t estimate repair costs, the remaining life of appliances, or other systems for you. If you are concerned about particular items, you may need to get your own repair and replacement bids from local contractors.   

Home Inspection Assessment

Depending on the inspection report, you may decide to proceed with the sale, schedule additional inspections, renegotiate the sale price with the seller (if there are serious issues), ask that certain repairs be made, or cancel the contract altogether. If you request major repairs, you may also ask for a re-inspection with the original inspector to verify that the original issue(s) has been resolved. 

Takeaway

Since the Farmington Hills home you buy will probably be one of the biggest, most valuable purchases you will ever make, a professional home inspection will help ensure that you’re making the right home purchase decision and a sound investment. 

Partner with Top-rated Farmington Hills MI REALTOR® -Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamWhether you are interested in buying a home in Farmington Hills, MI, or its time to list your current property, experience matters most in a changing market.

With over 20 years of local experience, Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings.

Known for his professionalism and care for every detail, Tom is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community.

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For sellers, Tom will create a comprehensive marketing plan that exposes your home to the public as well as to other real estate agents through the Multiple Listing Service (MLS), other cooperative marketing networks, open houses for agents, and so on.

Your listing will appear on all the most popular real estate sites where buyers spend hours a day looking at homes such as Realtor.com, Zillow, Trulia, REMAX, Redfin, and dozens of others. Your property will also be featured on Tom’s own highly-trafficked website Homes2moveyou.com. You can be assured that your home will get sold quickly and for the highest market price.  

Tom works very hard for his clients. He will protect your interests, advocate for you, and be your trusted guide and advisor throughout the home buying or selling process. If you or someone you know is interested in Farmington Hills MI real estate, please give Tom a call today at (248) 790-5594 or you can reach him here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

Buying a Home in Farmington Hills MI? Why You Need A REALTOR®

Buying a Home in Farmington Hills MI? Why You Need A REALTOR®

Buying a Home in Farmington Hills, MI? Why You Need A REALTOR®

If you are thinking about buying a home in Farmington Hills, MI, you will want to consider hiring a professional real estate agent to help you through one of life’s largest financial transactions. A Farmington Hills MI REALTOR®’s job is to match you with a home that fits your lifestyle needs and budget and also help you with making an offer, negotiations, the home inspection, and closing on your new place.

Some buyers may hesitate to use a professional real estate agent because they don’t want to pay the agent’s commission fee. That being said, it’s actually the seller that is responsible for paying the commission fee and not the buyer, which are typically about 5 to 6 percent of the home’s purchase price and split between the listing agent and buyer’s agent. 

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A Farmington Hills MI REALTOR® is a professional who works on your behalf and advocates for your interests. Because most sellers will have seller representation, you also want someone that has your back to represent you.

What You Will be Responsible for Without a Farmington Hill MI REALTOR® 

If you should decide not to hire a professional Farmington Hills MI real estate agent, you will be responsible for the following: 

1). You will have to uncover homes in the neighborhood or area you want to live in that match your budget and lifestyle needs. Although the many property search sites online can give you a sampling of what homes are currently available, you will have to research whether a seller’s asking price is justified based on comparable home sales in the area. 

Realtors also have access to even more listings. Sometimes properties are available but not actively advertised. A real estate agent can help you find those hidden gems. A local REALTOR® is also going to know the search area probably better than you ever could.

2). You will have to research information and important facts on a neighborhood, including those that a seller may choose not to disclose that could be important to you.  Researching local trends, market values, and other vital info can be daunting.

A real estate agent is equipped to know the ins and outs of every neighborhood. They’ll be able to tell you all about the school districts, zoning codes, the types of homes offered, and where to find everyday needs.

3). You will have to negotiate an offer, including the price and other clauses and contingencies in the purchase agreement. Any time you buy or sell a home, you’re going to encounter negotiations, which can easily get a little heated. Don’t you want a savvy professional negotiator on your side to get the best deal for you?

4). You will have to navigate the home inspection and negotiate repairs or credits with the seller. A REALTOR® will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that’s crucial to your particular needs.

5). You will have to sort through complex paperwork filled with real estate terms you might not understand. Real estate has its own language. It’s full of acronyms and semi-arcane jargon. A skilled real estate agent has been through all the paperwork before and actually knows what it means.

Questions? Concerns? Confused? An agent can clarify all the clauses, contingencies, and jargon-filled fine print as well as find hidden fees and conditions that you might have skimmed over.

Your Farmington Hills MI REALTOR® Will Run A Comparable Sales Analysis

One of the main tasks a REALTOR® will perform for you is a comparable sales analysis (also known as “comps”) of homes that are similar in size, condition, and age to the property you are interested in purchasing. 

Your Farmington Hills MI real estate agent will evaluate the prices of homes that are currently on the market and those that have sold in recent months to determine whether a seller’s asking price is in line with market data. Without this critical market data, you could easily end up overpaying for a home. 

As you can see, there are a lot of moving parts that go into purchasing a home. Hiring an experienced and skilled Farmington Hill MI real REALTOR® like Tom Gilliam can save you time, money, and possible headaches down the road.  

Partner With Top-rated Farmington Hills MI Real Estate Agent – Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamTop-rated Farmington Hills MI REALTOR® – Tom Gilliam has over 20 years of local experience and provides the kind of knowledge, skills, dedication, and personalized service you need and deserve when buying a home.

With access to the most up-to-date listings in Farmington Hills and surrounding Oakland County, Tom can help you explore your options and find your dream home. 

As your personal agent, Tom will protect your interests, negotiate on your behalf, advocate for you, and go the extra mile to ensure a smooth and successful transaction. 

 

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If you or someone you know is interested in buying a home in Farmington Hills or Oakland County, MI, please give Tom Gilliam a call today at (248) 790-5594

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

What Historically Low Mortgage Rates Mean for Farmington Hills MI Homeowners & Buyers

What Historically Low Mortgage Rates Mean for Farmington Hills MI Homeowners & Buyers

What Historically Low Mortgage Rates Mean for Farmington Hills MI Homeowners & Buyers

Mortgage rates fell below 3% for the first time ever in July, as the economy continues to struggle from the effects of the coronavirus pandemic. Many Americans have rushed to take advantage of this unprecedented opportunity, while others have questioned if these rates are truly a bargain?  

While average mortgage rates have hovered between 4% and 5% in recent years, they haven’t always been so low. In 1971, Freddie Mac began tracking 30-year mortgage rates, and at that time, the national average was 7.31%. As the rate of inflation started to rise in the mid-1970s, mortgage rates surged.

In 1981, the average mortgage rate reached a high of 18.63%. By October 1982, inflation normalized, which sent mortgage rates on a downward trajectory that would bring them as low as 3.31% in 2012. Since then, 30-year fixed rates have risen modestly, with the daily average climbing as high as 4.94% in 2018.

According to the National Association of Realtors’ Chief Economist – Lawrence Yun, “the number one driver of low mortgage rates is the accommodating Federal Reserve stance to keep interest rates low and to buy up mortgage-backed securities.” According to Yun, “we will see mortgage rates stay near this level for the next 18 months because of the significance of the Fed’s stance.” 

How Low Mortgage Rates Benefit Current Farmington Hills MI Homeowners 

Low mortgage rates increase buyer demand, which is good news for sellers. However, if you are not planning to sell your home in Farmington Hills MI anytime soon, you can still benefit from falling mortgage rates. Many homeowners are capitalizing on today’s historically low rates by refinancing their existing mortgages.  

Refinance applications have surged over the past few months. Reduced interest rates can save homeowners money on both monthly payments and total payments over the lifetime of a mortgage. The chart below shows the potential savings when you decrease your mortgage rate by just one percentage point. When it comes to refinancing, the bigger the spread, the greater the savings.

Estimated Monthly Payment On a 30-Year Fixed-Rate Mortgage 

Loan Amount 4.0% 3.0% Monthly Savings

Savings Over 30

Years

$100,000 $477 $422 $55 $20,093
$200,000 $955 $843 $112 $40,184
$300,000 $1,432 $1,265 $167 $60,277
$400,000 $1,910 $1,686 $224 $80,368
$500,000 $2,387 $2,108 $279 $100,461

If you are looking to refinance, expect to pay between 2% to 5% of your loan amount. Divide your closing costs by your monthly savings to find out how long it will take to recoup your investment, or use one of the handy online refinance calculators. 

How Low Mortgage Rates Benefit Farmington Hills MI Homebuyers 

For homebuyers, low mortgage rates can save you money on your mortgage payment and also increase your purchasing power. For example, let’s say you have a budget of $1,500 to put toward your monthly mortgage payment. If you take out a 30-year mortgage at 5.0%, you can afford a loan of $279,000. If the mortgage rate falls to 4.0%, you can afford to borrow $314,000 while still keeping the same $1,500 monthly payment – a budget increase of $35,000.

If the rate falls even further to 3.0%, you can afford to borrow $355,000 and still pay the same $1,500 each month –  a budget increase of $76,000!  If you’ve been priced out of the market before, today’s rock bottom mortgage rates may put you in a better position to afford the home you’ve always dreamed of.  

How Low Could Mortgage Rates Go?

No one can say for sure how low mortgage rates will fall or when they will rise again. A lot depends on the trajectory of the COVID-19 pandemic and the resulting economic impact. Positive news about a vaccine or a faster-than-expected economic recovery could send rates back up to pre-pandemic levels. However, Freddie Mac and the Mortgage Bankers Association predict 30-year mortgage rates will average 3.2% and 3.5% respectively in 2021.  

While mortgage rate forecasts may differ slightly, many experts agree on one thing: Those who wait to take advantage of the lowest rates ever in history could miss out on the deal of a lifetime. 

Partner with Top-Rated Farmington Hills MI REALTOR® – Tom Gilliam

2020 Best of Farmington Hills REALTOR - Tom GilliamAre you currently in the market to buy a home in Farmington Hills, MI? Tom Gilliam is an award-winning Farmington Hills MI REALTOR® with over two decades of local experience. Tom keeps his finger on the pulse of the market at all times and is the first to know when new inventory becomes available, ensuring that his buyers have access to the most valuable homes and securing an offer.

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With extensive local market knowledge and access to the most up-to-date Farmington Hills MI listings, Tom can help you explore your options and make the best home purchase decision. Streamline your home search by having Tom put together a list of homes for sale in Farmington Hills that are the best fit for your lifestyle and needs.

Tom works extremely hard for his clients and provides the kind of personalized service you need a deserve when buying a home. If you or someone you know is interested in Farmington Hills MI real estate, please give Tom Gilliam a call today at (248) 790-5594

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

Sources: CNN Business, Bankrate, Mortgage Bankers Association Mortgage Market Forecast July 15, 2020, Fannie Mae July 2020 Housing Forecast, Freddie Mac June 2020 Quarterly Forecast

Buying a Home in Farmington Hills MI: 5 First-Time Homebuyer Mistakes to Avoid

Buying a Home in Farmington Hills MI: 5 First-Time Homebuyer Mistakes to Avoid

Buying a Home in Farmington Hills MI: 5 First-time Homebuyer Mistakes to Avoid – Having a home to call your own is the “American Dream.” Whether you’re planning to be there for four years or forever, buying a home will be one of the most important personal and financial decisions as well as one of the largest purchases you’ll ever make. Hence the reason why it’s important to know about the common pitfalls that many first-time homebuyers make so you can avoid them.

Here’s a list of typical home-buying mistakes to avoid when buying a home in Farmington Hills MI, which will save you some significant stress on your home buying journey:

1). Not Partnering with A Qualified REALTOR®   

Since finding homes online is fairly easy these days, you may even question whether or not you need to hire a real estate professional. However, the home buying process includes a lot more than just finding a home that you like in the neighborhood you want to live in. It also involves hundreds of details that need to be planned for and navigated in order to achieve a successful transaction. In addition, you’re probably not even seeing the most accurate and updated listings online. A home you fell in love with online today may already be under contract, which is an often occurrence.  

A qualified Farmington Hill MI REALTOR® like Tom Gilliam is an invaluable resource. He is aware of new inventory as soon as it becomes available, ensuring that you have immediate access to the best homes and securing an offer. He is also highly knowledgeable about the area where you want to move and can inform you about the different neighborhoods and communities, the types of homes and features offered, the builders, HOAs, school districts, surrounding area amenities, local community developments, and much more.

An experienced and skilled agent like Tom, who is an area expert and transaction-management ace, will keep you informed every step of the way, protect your interests, advocate for you, and handle the maze of transaction details for a smooth and successful outcome.

2). Buying More House Than You Can Afford  

Although this one may seem obvious, it is a common pitfall among many first time homebuyers. Taking on more mortgage than you can afford is like taking a sledgehammer to your budget. You’ll end up wiping out all your other financial goals and struggle just to pay your basic utilities. Before you begin your home search, you’ll want to figure out exactly how much house you can comfortably afford and still have a life.

A good rule of thumb is that your house payment, including principal, interest, property taxes, homeowner’s insurance, private mortgage insurance (PMI), and homeowners association (HOA) fees (depending on your situation), shouldn’t exceed 25% of your monthly take-home pay.  Also, when buying a home, you’ll typically need enough to cover six factors: the down payment, closing costs, moving expenses, repairs and maintenance, the first few months’ mortgage payments, and your emergency fund.

These factors, when added together, will allow you to calculate a ballpark figure for how much you’ll need to save up to be able to afford a home. If you do the math and would be barely able to scrape by, consider holding off until you’re in a more stable financial position.

3). Not Getting Pre-Approved for a Loan

If you start home shopping before you get pre-approved for a mortgage loan, you could get a nasty surprise when you apply for a loan and discover you qualify for much less. It can be tempting to pull up listings online and schedule appointments to see your favorite choices before filling out a mortgage application. But if you don’t already have a preapproval letter in your pocket, that can be a mistake.

A mortgage preapproval helps you understand how much house you can afford before you begin your home search, makes you more attractive to sellers and alerts you to problems that may affect your ability to actually get a loan. To get preapproved, you’ll need to provide the lender with documents they will use to verify your personal, employment, and financial information.

Keep in mind that a lender might approve you for a loan amount that’s realistically more debt than you can comfortably carry month-to-month. Consider that you’ll need to pay homeowners’ insurance, taxes, and possibly flood insurance on your new property or PMI on your loan.  

4). Not Understanding Your Down Payment Options

One of the biggest headaches and obstacles for many first-time homebuyers is the downpayment. – the money that you contribute to the total cost of the purchase. If you don’t have a certain amount to put down on your home loan, you might find yourself paying private mortgage insurance (PMI) on the lifetime of the loan.

Depending on your credit score, the bank, and other factors, PMI can cost between 0.5 percent to 1 percent of the total loan amount. Most banks require at least a 20 percent down payment before they will waive the need for PMI on the loan. For a $300,000 home, you would need a $60,000 downpayment to avoid PMI. So, how much should you save for a down payment?

Typically, it’s recommended that you have at least 20% of the total house price to avoid paying PMI, a type of insurance that protects your lender from losing money in case you can’t make your mortgage payments. However, there are loans that allow you to put as little as 3 percent down on the home which is more attainable, especially for first-time homebuyers. Some government organizations offer free down payment grants or loans to qualified buyers.

Depending on your age, income level, credit score, and other factors, you could qualify for free money to wrap into your down payment; a full rundown of programs is available at downpaymentresource.com. For example, USDA loans and VA loans each have a very specific set of criteria you need to meet in order to qualify for a zero-down mortgage.

5). Not Waiting to Make Other Big Purchases Before Closing 

You’ve been pre-approved for your first mortgage loan, you’ve found the perfect home, your offer has been accepted, the home inspection passed and your loan officer has locked you in at a favorable rate. All that being said, its not the time to go out and buy yourself a big screen TV or furniture for your new house just yet because you won’t officially be a homeowner for another 30 days, give or take.

Even if your lender has approved your mortgage loan, they will check your credit again just before your closing date, prior to granting you the funds. You want to keep your finances stable and opening a line of credit or making a big purchase after mortgage approval is a common mistake. A change in your credit score can actually make you ineligible for the loan, so wait until after closing to make any other financial moves, just to be on the safe side. 

The Takeaway

If this is your first experience buying a home in Farmington Hills MI or it’s been many years since your last home purchase, knowledge is key. Along with knowing what issues to avoid, it’s important to glean first-time homebuyer tips so you know what to expect and what questions to ask your agent.

Partner with Top-rated Farmington Hills MI REALTOR® -Tom Gilliam  

2020 Best of Farmington Hills REALTOR - Tom GilliamA top-rated Farmington Hills and Oakland County MI real estate agent like Tom Gilliam can show you more properties and save you thousands of dollars when buying a home. You need an agent who knows the area, processes a vast network of local connections, and has the skills to negotiate like a pro.

From first-time homebuyers to multi-million dollar investors, Tom continually strives to provide top quality service for his clients. With access to the most up-to-date MLS listings for Oakland county MI properties, Tom is able to match your lifestyle needs with the perfect home.

If you are ready to list your current property, Tom has the experience and skills necessary to handle the sale and marketing of your home for the optimum results. Tom employs the latest technology to deliver massive exposure that will drive mega-response from qualified buyers. Tom also partners with the most talented home stagers to ensure that your home is thoughtfully staged to highlight its features and amenities.

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With over 25 years of local real estate experience, Tom will protect your interests, advocate for you, and go the extra mile to ensure a smooth and successful transaction. If you or someone you know is interested in buying or selling real estate in Farmington Hills, MI, or in surrounding Oakland County. please give top-rated Farmington Hills MI REALTOR® – Tom Gilliam a call today at 248-790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Call: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578

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