Video Transcript: Common Mistakes Homebuyers Make
Stacey: If you're in the market for a new home, you'll want to avoid some common pitfalls that can make the buying experience more difficult than it needs to be. What are these mistakes? Let's find out on "What Works Now."
Voice Over: AOL and Bank of America Home Loans. Helping you find out what works now.
Narrator: Buying a home is a thrilling experience, but it can also be a complex one. Let's look at some common blunders you'll want to avoid. A big mistake that homeowners make is they don't have a sales contract on their existing house before agreeing to buy a new one.
Why is this a problem? The only way you can truly know how much house you can afford is if you know how much your existing one fetches. More importantly, in today's market, you never know how long it will take to sell your property. The days of receiving multiple bids on your house on the first day are over. So don't be surprised if the process takes several months, or even a year. Wait to list your house until after you agree to buy a new one, and you can get stuck carrying two mortgages.
Stacey: Another common error that homeowners make is that they don't pull their credit reports before applying for a mortgage.
Narrator: Here's a fact. Many credit reports contain errors. And those mistakes can drag your credit score down, and cost you more in fees on a loan. So you'll want to go to annualcreditreport.com for a free copy of your credit report, so you can fix any problems before you contact the lender. You should also consider checking your credit score at MyFICO.com. The most competitive mortgages go to those buyers with a credit score of 700 or above. If yours is lower, work on raising it, by paying off your revolving debt, including credit cards, and sending in your bills on time.
Stacey: Coming in at number 3: Failing to secure financing before making an offer.
Narrator: By going through the mortgage pre-approval process, you'll find out how much the lender is willing to loan you, and at what interest rate. This helps you determine what your monthly payments will look like, and whether or not you can comfortably afford the home you have your eye on.
Stacey: Finally, once you're ready to sign a contract for your dream home, don't forget to include some contingencies.
Narrator: Contingencies are your legal out if something goes wrong during the buying process. Without them, you could lose the money you put down to secure the deal, which typically comes out to 1 to 3 percent of the purchase price.
Stacey: So there you have it. If you can avoid these common mistakes, you should be able to prevent some headaches, and find yourself enjoying your new home a lot sooner.
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