Here are some common mistakes that can be avoided for a smoother home purchase.
Do Not Take on Additional Debt After You Pre-qualified With Your Lender
A common mistake is changing your debt to income ratios by making additional purchases on credit. Even if you have the ability to make the purchase it is advisable that you speak with your lender first. Lender’s will often run credit checks again before closing. Sometimes new information on the credit report is enough to delay the process of closing on the house. This delay may affect the agreed recording date both you and the seller have been planning on. Delays in closing can be prevented if your lender approves and processes your new credit information upfront instead of finding out right before you are suppose to close.
Do Not Wait on Your Home Owner’s Insurance
Home Owner’s insurance should be researched early in the process. It is common for many purchasers to wait just before closing to secure insurance. These delays sometimes prevent a timely recording. On rare occasions it is discovered that the home may have prior claims that prevents it from being insured. It would be good to discover that upfront than 3 days before you are to close.
Do Not Prematurely Lock Your Interest Rate
We often see situations where the lender locks in the interest rate and then there is delay in the closing. Interest rates are often locked for a specific period of time, usually 30 days. If the closing does not happen in that time frame the lender often has healthy fees associated with extending your lock period. A real estate purchase is full of unknowns that may prevent a closing from occurring on time. Discuss with your lender what the consequences would be in the event you go beyond your rate lock date.
Do Not Set Your Recording Date for the Last Day of the Month
The majority of real estate transactions are set for the last day or days of the month. By recording on the last day of the month there are fewer upfront costs associated with prepaid interest. This savings usually doesn’t amount to much and really isn’t a savings at all but just effects when you make your next payment. For example, if you record on the 15th of the month you have to come up with about 15 days of interest. Your next payment would be 45 days away. If you record on the 30th of the month, your next payment would be about 30 days away.
In my opinion, expecting to record on the last day of the month is a foolish thing to do. Because so many contracts are set this way, it often causes a bottleneck at the end of the month. It is common to talk to a lender or the title company at that time and hear the stress in their voices as they speak the words “end of the month”.
If a large number of transactions are trying to close at the same time, the “end of the month”, it is unlikely everyone will be successful. By setting a recording date that doesn’t fall at the end of the month, you are more likely to close on time and not get caught in the typical rush that occurs at month end.
Larry and Jacque Ficek