There is a lot going on in the home buying process. While your sole focus may be on finding the perfect property there are other items you need to keep an eye on. These items may not affect your purchase but they will have an impact months and even years down the road. The best way to avoid running into trouble is to consciously think about every purchase decision you make. Even though you may have five other things on your mind you need to know exactly what you are getting into. Never commit to anything until you know what it means and how it will impact you. Here are a few of the most commonly overlooked home buying items.
1. Loan application. The first step in any purchase is financing. It is up to you to determine who you want on your loan application. Typically this is based on the credit score, job history and income of the borrowers. However there are times when you can either add or omit one of the borrowers. Whoever is on the loan application is reported to the credit bureaus. This can be tricky if there is a separation down the road. In a joint application if there is a late payment it impacts both borrowers. This could also have a direct impact on ownership interest in the event of separation or even death. Before you apply for a mortgage determine who you want on your loan application.
2. Homeowners Insurance. As you go through the process there are a series of items you will need to proceed. One of those is homeowners insurance on the subject property. Most buyers reach out to one local insurance agent and go with whatever they recommend. While we can never anticipate an emergency we need to be prepared for it. It is essential that you have the right coverage in the event of an unforeseen problem. After it happens is often too late to do anything about it. The homeowner’s policy can be confusing if you don’t know the language. Ask your insurance agent specific questions and make sure you are comfortable with the type and amount of coverage provided.
3. Loan Type. One of the biggest changes with the mortgage industry is with the lack of loan programs currently available. Last decade there were dozens of programs and products to think about. Fortunately most of these products are long gone. One product that has stuck around is an FHA loan. FHA loans offer reduced down payment and low interest rates. For this there is PMI (private mortgage insurance) included in the payment for the life of the loan. Most loan products offer the ability to eliminate PMI if the value reaches a certain number. With an FHA loan the only way to eliminate it is to refinance. This may not make sense a few years from now if interest rates increase. Before you commit to an FHA loan you should see what other options you have available.
4. Attorney. Your attorney works for you. It is important that you are comfortable with who you have representing you. They are the last line of defense if you have questions at the closing table. Even if you are given the name of a local attorney you should seek a few different options. Talk to at least three attorneys and see who you feel the most comfortable with. You need to be able to get any questions answered or issued resolved in a timely fashion. By doing a little homework you can find an attorney you feel comfortable with.
Treat every item in the purchase process with the importance it deserves. Never make any decisions based on convenience or a willingness to keep things moving forward. One bad decision can cause regret for years to come.