The Closing Process When Buying a Home in Farmington Hills MI

The Closing Process When Buying a Home in Farmington Hills MI

The Closing Process When Buying a Home in Farmington Hills MI: A real estate closing, also called a settlement, is the process of transferring ownership of a home from the seller to the buyer. In the context of real estate, “closing” is basically synonymous with “signing.” Reviewing and signing documents is the bulk of what a home buyer does during this process. But that’s not all that happens.

Summary: Come closing day, the buyer and seller will sign all the necessary papers to officially seal the deal; the property title and ownership get transferred from the seller to the buyer; the home buyer will sign a variety of documents prepared by the escrow/closing agent and will also pay whatever closing costs are due; and agent commissions and other funds are distributed by the escrow agent. 

The closing process is usually managed by an escrow agent and sometimes an attorney who specializes in handling real estate closings and preparing the related documents. In some states, the home buyer and seller can close separately at different dates and times. While in other states, both parties must attend closing at the same time and sit at the same table with their respective real estate agents and/or attorneys. 

Even though you and the seller may agree on a closing date, your agent will probably work with your lender and title agency to suggest a timeline that allows them enough time to correctly execute their end of the deal.  

The Steps at Closing

While the logistics mentioned above can vary, the steps at closing are basically the same.  

  • The home buyer will bring a cashier’s check to cover all remaining closing costs and fees. 
  • The property title will be signed over from the homeowner to the buyer, thus transferring ownership.
  • The closing agent (or lawyer or notary) will register the new deed with the appropriate government office. After that, the home buyer will be listed as the official owner of the property. 
  • The respective real estate agent(s) involved in the transaction will receive their commission fees. 
  • The seller will receive any proceeds they earned from the sale, once their mortgage balance and closing costs have been paid off.

Closing day documents

A real estate transaction is a complex process that involves a lot of paperwork, and there are many documents that buyers will need to sign on closing day. Fortunately, the escrow or closing agent will have all of the required documents prepared and ready for the buyer’s signature upon arrival at closing. 

There will be mortgage-related documents, legal disclosures, tax records, and more. It’s not uncommon for buyers to sign their name over a dozen times before all is said and done. Buyers will have to sign the property deed, bill of sale, mortgage agreement and note, transfer tax declaration, and closing disclosure. 

Once the buyer has finished signing all of the closing documents, and all funds have been properly distributed, the deed of ownership will transfer from the homeowner to the buyer. If it is a joint closing, the seller will then hand over the keys. If it is a separate closing, the seller’s agent might deliver the keys (This can vary).

How Farmington Hills MI homebuyers can prepare in the days leading up to closing

Knowing what happens in the days leading up to closing can reduce some of the stress and help ensure a smooth transaction. Here is what you can typically expect to happen: Your mortgage lender will send you a closing disclosure a few days prior to closing. Among other things, the closing disclosure shows how much the buyer has to pay in closing costs. The buyer will then need to obtain a cashier’s check in the amount stated in the closing disclosure.

In some cases, the buyer might wire the money to the title/escrow company, rather than paying by cashier’s check. Typically, the buyer brings a copy of the homeowner’s insurance policy to the closing, or an insurance binder, depending on what the lender requires. During the week prior to closing, last-minute underwriting issues may also be resolved in some cases. 

What Farmington Hills MI homebuyers need to bring on closing day

Buyers need to bring all necessary paperwork with them to closing to make sure nothing is missing, different, or overlooked. Some important documents include: 

  • Cashier’s or certified check – You’ll pay your closing costs with a certified check or a wire transfer from escrow.
  • Proof of homeowners insurance – Lenders require an insurance policy before closing   
  • Photo ID – You’ll need to bring a government-issued identification for the title company.

Closing day check list

Review the following checklist to make sure that you have everything in order so that the closing day process runs as smooth as possible:

  • Contact the closing agent – Once you know who your closing agent is and where they’re located,  contact their offices to see if they have any special instructions for you. They’ll typically have a list of items you’ll need to bring.
  • Review your closing documents – Legally, you should receive your closing documents 3 business days prior to closing. Make sure you read them so you understand what you’re signing and check for any errors. Double-check all of the basics: spelling, numbers, names, etc.  
  • Check the fees – Your most recent loan estimate should be close to your closing disclosure. Some fees may change a little, but there shouldn’t be any big surprises at this stage.
  • Review seller responsibilities – Review your final walk-through checklist to make sure the seller has taken care of all their responsibilities.
  • Be payment ready – Expect to write the check for closing costs. Plan in advance if you are transferring funds from another account so they are cleared.

How much It costs to close on a house in Farmington Hills MI 

Closing costs are the fees that third parties charge and typically include the home inspection fee, premium for homeowners insurance, appraisal fee, credit report charges, attorney expenses, and so forth. Some of these fees, such as earnest money and home inspection fees, will need to be paid before the actual closing day. On average, homebuyers will pay between 3% to 4% of the purchase price of the home in closing fees. For example, if your home costs $300,000, you might pay between $9,000 and $12,000 in closing costs.

The takeaway

Closing on a house in Farmington Hills MI may seem like a cumbersome process, but the toughest part of it is the waiting. If you enlist the help of a skilled Farmington Hills MI REALTOR and other experienced professionals at every stage of the process, you will feel confident and look forward to closing day when you get the keys to your new home!

Partner with award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years, offering his guidance and expertise to home buyers and sellers. Tom understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust.

As your agent, Tom will protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure a smooth transaction and the best results possible. He is able to provide the kind of knowledge, skills, dedication, and personalized service you need and deserve. If you or someone you know is interested in Farmington Hill MI real estate, feel free to reach out to Tom directly at (248) 790-5594 or you can get in touch 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 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Buying Mistakes to Avoid When Buying A Home in Farmington Hills MIAre you currently in the market to buy a home in Farmington Hills, MI? If this is your first rodeo as a homebuyer, or if it’s been several years since you last bought a home, knowledge is power. Buying a home comes with many big decisions, and it doesn’t hurt to be mindful of possible pitfalls so you can avoid as many mishaps as possible. Some are minor, some are costly and some even involve buyers purchasing homes that are completely wrong for them.

Here are 10 common home buying mistakes to avoid and and some expert advice to help you on your journey to homeownership:  

1).  House hunting before getting pre-approved  

House shopping can be exhilarating and it can also be taxing, so it’s no surprise that many people want to get going on it right away. However, shopping for a home before getting pre-approved for a mortgage is not a good idea.

Getting pre-approved ensures that you have the financial ability to purchase a home, helps you understand how much home you can afford, and shows sellers that you are serious when making a purchase offer. There’s no need to tour any Farmington Hills MI homes for sale if you don’t know which properties are within your budget.

Sellers are also more likely to consider your purchase offer if they know they are dealing with someone who already has a mortgage pre-approval.

2).  Obtaining a rate quote from only one lender

No two lenders are the same and each one may offer different interest rates, closing costs or other fixed fees. If you don’t shop around, you could miss out on a better deal. By getting quotes from a number of lenders, you’ll be able to choose the one that will save you the most money at the closing table or over the life of the loan.

Pick at least three to five lenders and request quotes on the same day to help you compare apples to apples. According to Freddie Mac, getting a quote from just one additional lender could save you an average of $1,500 over the life of a loan.

Get a quote from 5 different lenders and the average savings doubles. Visit lender websites to learn more about the products they offer and read customer reviews to make sure you’ll be in good hands once the loan closes. Find a lender who is a good fit in costs and in service.  

3). Not checking credit reports and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.

You can request a free credit report each year from each of the three main credit bureaus. Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay.

Federal law gives you free access to your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. Using the government-mandated AnnualCreditReport.com site is the quickest way, but you can also request them by phone or mail. Disputing any credit report errors and getting those negative items removed can be a quick route to a better score.

4).  Buying more home than you can afford

Don’t buy more house than you can reasonably afford. The maximum loan amount on your pre-approval letter doesn’t mean you should look at homes that are priced to match it. The lender may know your income and even your debt-to-income ratio, but that’s all they look at when it comes to monthly expenses.

The lender doesn’t know how much you pay for groceries, gas and insurance, healthcare, school tuition or loans, utilities, and other expenses you might have.  If maxing out the loan amount you qualify for means that you are stretching your monthly budget to the limit, you probably need to find a more affordable home.

Even if you can make your mortgage payments with all of your other monthly expenses, a higher monthly payment can affect other areas of your life. The more money you borrow, the less you’ll be able to put towards important savings such as your 401(k) or emergency fund.

5).  Depleting your savings

One of the biggest mistakes many first-time homebuyers make is spending all or most of their savings on the down payment and closing costs. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance.

This may translate to substantial savings on the monthly mortgage payment, but it’s not worth the risk of living on the edge. Instead, aim to have three to six months of living expenses in an emergency fund, even after you close. Depleting your emergency or retirement savings to make a large down payment is a risk best avoided.

6).  Being Unaware of the hidden costs of owning a home

Many first-time home buyers are unaware of the hidden costs of homeownership because they’ve never owned one. When moving from an apartment to a home, there can be some additional costs that you may not have experience paying as a renter.

These hidden costs include higher utility bills, new utilities like trash removal and recycling, property taxes, homeowners insurance, outdoor maintenance and equipment, maintenance and repair, tools for home improvement and maintenance, furniture to fill more space, etc.

Figure out how much each expense will be, add that amount to your savings goal, and have it saved up before you move in.

7).  Believing that you must have a 20% down payment

There’s still a long-standing myth that you need a 20% downpayment in order to buy a home, but that isn’t actually correct. When you make a bigger down payment on your home purchase, you’ll likely get a better mortgage rate and a lower monthly payment, since you’re not borrowing as much. But that doesn’t mean you should hold off purchasing your first home, or upgrading to a new one, until you have a 20% down payment.

You can get a conventional loan with as little as 3% down or a loan backed by the Federal Housing Administration (FHA) with just 3.5% down. There are also 0% down payment programs available if you’re in the military, or you’re a low- to moderate-income borrower buying a home in a rural community.

Plus, some first-time buyers may qualify for a down payment assistance program through their state or local housing agency.

8).  Not planning for closing costs

Your down payment isn’t the only upfront cost you’ll have as a homebuyer. With such a big emphasis on the purchase price and the down payment, many people fail to plan for closing costs, which can range from around 3% to 6% of your loan amount. To prepare for closing costs, it helps to know what’s included in this major expense.

Although some of these may not be included in your closing costs, common fees include the appraisal, home inspection, property taxes, title and attorney fees, lender fees, application fee, prepaid interest, loan origination fee, discount points, title search fee, mortgage insurance application fee, upfront mortgage insurance, and lender and owner title insurance.

Other costs and specific mortgage fees will depend on where the home you are buying is located and the type of loan you get.

9).  Changing jobs or having income gaps

In order to qualify for a mortgage, you need to show stable job history and consistent income. Your lender will scrutinize your income and employment history over the last two years to determine whether you have that stability.

If you’ve been in between jobs in the past two years, be prepared to explain why.  If you’re looking to take a new job before closing on your mortgage, be strategic because it may delay your loan approval. Communicate potential job changes to your lender and be prepared tp supply any additional documentation they may request.  

10).  Applying for credit or charging up credit before closing

One important home buying mistake you want to avoid is taking on more debt in the middle of the mortgage lending process. This misstep can quickly derail your loan approval. It’s recommended that borrowers not take on any new debt or apply for a credit card until after closing on their new home. The loan underwriting department at the bank may be checking your credit after you’re approved and before the bank funds your loan.

If you max out your credit card or take out an auto loan before your closing, that debt is factored into your mortgage application. More debt pushes up your debt-to-income (DTI) ratio, or the percentage of your gross monthly income used to repay debt. If your DTI ratio exceeds the maximum ratio for your loan program, your loan may not be approved.

Partner with Award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years – offering his guidance and expertise to buyers and sellers. Tom is able to provide his clients with the kind of knowledge, skills, commitment, and expertise they need and deserve. He also understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust. Tom will protect your interests, advocate for you, negotiate on your behalf, and go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling Farmington Hills MI real estate, feel free to reach out to Tom Gilliam directly at (248) 790-5594 or you can get in touch 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 

 

Farmington Hills MI First-time Homebuyers: The Down Payment

Farmington Hills MI First-time Homebuyers: The Down Payment

Farmington Hills MI First-time Homebuyers: The Down Payment

As a first-time homebuyer, socking away money for a down payment to purchase a home in Farmington Hills MI may seem like an overwhelming task. The down payment is the upfront cash you pay to qualify for a home loan, which is expressed as a percentage of the home price. 

Many potential homeowners think that 20% down is the only option when it comes to getting a mortgage, but, that is just a common misconception, as there are many options out there.  

Lenders often look at the down payment amount as your investment in the home. Not only will it affect how much you will need to borrow, but it can influence whether your lender will require you to pay for private mortgage insurance (PMI).

Mortgage insurance protects the lender in case the borrower defaults on the home loan, and typically, you will need PMI if you put down less than 20% of the home’s purchase price. 

Different loans require different down payment percentages

Down payment requirements can also vary by lender and your credit history. The minimum down payment for an FHA loan is just 3.5% with a credit score of 580 or higher, for example, but the minimum is 10% with a credit score of 500 to 579.

State and local down payment assistance

Exploring local and national first-time homebuyer assistance programs is an important step in the journey to homeownership. Down payment assistance is often combined with favorable mortgage interest rates or tax breaks.

Many state housing authorities combine closing cost and down payment assistance programs with mortgages that have favorable interest rates. Some states even offer tax credits you can use on your federal tax return.

These first-time homebuyer assistance programs can boost your chance of homeownership in particular geographic areas, or help borrowers in certain professions, such as educators, first responders, or active-duty military and veterans. 

It’s important to note that programs will usually set a maximum sale price and some have income limits, so not all home buyers will qualify. Still, it’s worth checking out programs in your state.

Down payment gifts from family members

It’s not uncommon for first-time homebuyers to get help from family members. Using a gift to supplement savings can help first-time homebuyers clear the down payment threshold.

According to a 2019 Generational Trends report from the National Association of Realtors, of all homebuyers ages 28 and younger, 28% used a gift from a relative or friend to make a down payment. And of all buyers ages 29 to 38, 21% used a gift.

Down payment gifts are acceptable to lenders, but applying a gift toward a down payment involves more than depositing a check. The donors will have to verify in writing that they made the gift and have the financial ability to make such a donation.

They will be required to provide bank statements as proof, along with a letter confirming that the donation is a gift and not a loan. 

If the gift funds are added to the buyer’s bank account after settlement, then documentation will still be required before it can be applied to the purchase. Typically, this will require a receipt of the cashier’s check as given to the closing agent.

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

Whether 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.

Offering over 20 years of local experience, top-rated Farmington Hills REALTOR® – Tom Gilliam offers in-depth local market knowledge and access to the most up-to-date listings. Tom is known for his professionalism and is an expert at uncovering the perfect home for his clients’ lifestyle needs in the right Farmington Hills neighborhood or community. 

2020 Best of Farmington Hills REALTOR - Tom GilliamFor 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.comYou can be assured that your home will get sold quickly and for the highest market price.  

Farmington Hill MI Homes for Sale

Tom works very hard for his clients. As your agent, he will protect your interests, negotiate on your behalf, 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 Gilliam 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

 

 

Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process

Mortgage Pre-qualification, Pre-approval, and Approval Process  

If you are ready to make your dream of homeownership a reality, then you have probably already heard that you should consider getting prequalified or preapproved for a mortgage. It’s important to understand what each of those terms means. When you are working toward a major life goal like buying a home, you want every advantage and tool in your homebuying arsenal. 

In this article, we will discuss the mortgage prequalification, preapproval, and approval process and what to expect from all three:

Mortgage Pre-qualification 

When you pre-qualify for a home loan, you are getting an estimate of what you might be able to borrow. Many first-time homebuyers find that getting prequalified is helpful, especially when they are establishing their homebuying budget. Pre-qualification also provides the opportunity to learn about different mortgage options you may not know about and work with a lender to identify the right fit for your individual needs and goals. 

Keep in mind that you may qualify to borrow more money than you are comfortable spending on a home. But that doesn’t mean you have to spend more. It’s always a good idea to limit your home search to houses priced at an amount you can comfortably afford and obtain a mortgage amount that easily fits into your overall budget. 

Mortgage Pre-approval 

Pre-approval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. Getting preapproved is a smart step to take when you are ready to put in an offer on a home. It shows sellers that you can secure a mortgage, which makes it more likely that you will complete your purchase of the home. Because you have had your finances and creditworthiness verified, sellers will be more likely to consider you a serious buyer.  

With a pre-approval, you will complete a mortgage application. The lender will verify the information you have provided and perform a credit check. If you are, in fact, preapproved for a home loan, you will receive a pre-approval letter, which is an offer (but not a commitment) to lend you a specific amount of money, which is good for 90 days. Lenders will look at every detail of your finances when granting pre-approval. Be prepared to answer lender questions as soon as they come up.

How Long It Takes To Get Pre-qualified or Pre-approved 

Pre-qualification and pre-approval can take different amounts of time. Pre-qualifying is a quick process and can actually be done online. You may even get results within an hour. Since you will need to supply more information for a mortgage pre-approval, it is likely to take more time. You should expect to receive a pre-approval letter within 10 business days after you have provided all of the information requested by your lender.  

Information Needed to Get Pre-qualified and Pre-approved

The information you will need to provide to get pre-qualified for a mortgage:   

  • Basic income information
  • Credit Check
  • Basic information about bank accounts
  • Downpayment amount and desired mortgage amount
  • No tax information required

 The information you will need to provide to get pre-approved for a mortgage:

  • Copies of pay stubs that show your most recent 30 days of income
  • Credit check
  • Bank account numbers/two most recent bank statements
  • Downpayment amount and desired mortgage amount
  • W-2 statements 
  • Signed, personal and business tax returns from the past two years

Pre-qualification Vs. Pre-approval Comparison

  PREQUAL  PREAPPROVAL
Benefits You can start house-hunting knowing how much you might be able to borrow You’ll be ready to make an offer with confidence—and gain a competitive advantage
Process Provide basic information to a lender and quickly get a prequalification amount After submitting documentation to a lender, you should receive a decision within 10 business days
Documentation Answer questions for this process, plus a credit check Provide proof of financial details, plus a credit check

 Factors Involved with Getting Approved for a Mortgage 

Even if you have been pre-approved for a mortgage, it isn’t an automatic final approval. Pre-approval is only the first step in the loan process and your underwriting can still be denied. Being pre-approved will make sure you have a good credit score, verify your income, and assure that you will be able to pay back the loan amount. 

Once you’ve been pre-approved, your file must then go to the underwriter who will take a much deeper look into your financial stability.  The underwriter will review your loan scenario and supporting documentation to determine whether you qualify for the loan, with the following basic criteria in mind:

  • Your ability to repay the loan – Is your income enough to cover the new mortgage payment and all your other monthly expenses? Lenders use your debt-to-income ratio (DTI) and most lenders want your debt-to-income ratio to be 36% or less.
  • Your likelihood to repay the loan. Your payment history and credit score are indicators to lenders of your likelihood to make payments in the future.
  • The home’s value – The underwriter will look at the value of the home you are purchasing to verify that it meets or exceeds the purchase price and whether the loan-to-value ratio (LTV) fits within the loan program guidelines. With a conventional loan, most lenders require a loan-to-value ratio of no more than 80-95% (The higher your home’s value and the less you owe on it, the lower your LTV).
  • The source and amount of funds for your down payment – You will typically be required to pay private mortgage insurance (PMI), which increases your monthly mortgage payment if you have a down payment of less than 20%. The underwriter will review your information to estimate whether you have enough money to cover closing costs. Lenders also typically require reserves to cover your mortgage payment in case of emergencies or unforeseen events.

As you move forward, your income, debt, credit history, down payment, savings, home value, and loan program guidelines will all play a role in whether your mortgage application is approved.

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.

Search Farmington Hill MI homes for sale

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: 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.

Search the MLS for Properties in Farmington Hills

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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