Shane Ede and his wife of Jamestown, North Dakota, say that when they bought their first house in 2004, they were totally unprepared. With a combined income of just $45,000 and student loan debt topping $60,000, the Edes had an unfavorable debt-to-income ratio. But with no pre-qualification process or an experienced mortgage professional to stop this blunder, the couple managed to buy a three-bedroom house that was way out of their budget. They then spent the next two years barely scraping by — and they’re not alone.
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While lending practices and standards have varied in the years since, one important point remains: first-time homebuyers can make a lot of mistakes during the process of finding and financing a home. That’s according to Trevor Curran, a loan officer with Powerhouse Solutions, who says he’s seen a lot of those mistakes first-hand during his two decades of working in the business.
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In this episode of Destination Home, Curran shares the top five mistakes people make when purchasing a home. Check out the video for his insights into each. They include:
1. Making the wrong moves when managing credit. Think you should pay off all your credit cards and debt to qualify? Think again. Watch the video for Curran’s advice on the counterintuitive use of credit cards and what your loan officer could be looking at.
2. Thinking you’re pre-approved when you’re not. Curran says pre-qualification is an important first step while navigating homebuying — but an instant credit report and a quick chat with your loan officer does mean you're "pre-approved."
3. Using "just any" loan officer. Mortgage loan originators (as they're called in the biz) are not created equal, according to Curran. The difference in loan officer can result in everything from headaches during the process to loan terms that aren’t favorable for the purchaser.
4. Using pension or retirement fund money in a way that works against you. It can impact your debt-to-income ratio when you apply for a mortgage.
5. Buying the wrong house. According to Curran, “If you’re looking at a foreclosure, you’re buying someone else’s headache and competing with cash buyers. If you’re buying a short sale, you’re going to wait a long time for approval and you may not get the price you think you’re getting for the house.” In short, make sure the "deal" you’re getting is really worth the trouble.