When engaging a luxury house builder to construct the house of your dreams, we are sure that you will find plenty of articles telling you what you should be doing. But what about all of those things that you shouldnt be doing? Who is telling you about those? In this article, we have covered 10 of the most common financing mistakes that are made when engaging a builder.
1. Choosing the wrong mortgage
With the introduction of instant refinancing, a mortgage is no longer the lifetime commitment it once was. This doesnt mean that you should lock yourself into a loan that you havent thoroughly investigated. Make sure you have considered all of your options, including worst-case scenarios.
2. Confusing pre-approval or pre-qualification with an actual loan
It is important to note that pre-approval and pre-qualification are debatable terms because not all lenders apply the same definition to each. Pre-approval means that you will be lent up to a certain amount and pre-qualification is an estimate of how much you can borrow.
3. Having too much credit
Would you believe that having too much credit is almost as bad as having no credit or even bad credit? Lenders focus just as much on how much credit you have as they do on timeliness, so having lots of car loans and credit cards can actually get your mortgage declined.
4. Lying on your mortgage application
Lying on your mortgage application, even if youre just exaggerating your income a little, is a big no-no and could actually be a federal offense. You should also refrain from signing an application that is not completely filled out (some lenders will stretch the truth to get you approved).
5. Hiding if you cannot make your repayments
The absolute worst thing that you can do if you are behind or unable to make your mortgage repayments is to ignore phone calls and letters. You actually have a number of options available if you get a little behind, but your lender cannot do anything to help if you dont talk to them.
6. Skipping a house inspection
Did you know that failing to make your purchase subject to a satisfactory inspection upon completion of your house could be quite costly? An independent inspector will examine the house from top to bottom and ensure that everything is as it should be and above board.
7. Hiring just any agent to sell your current house
It is important to remember that not all real estate agents are the same you will want to look for one who specialises in your neighbourhood and who has already seen great successes. Ask potential agents how they plan to advertise your house and how they will make it more attractive.
8. Failing to thoroughly check your builder
It is of the utmost importance that you thoroughly check out potential luxury house builders before you engage one. Make sure you call several of their past clients and do some online research to determine whether there have been any complaints or law suits taken against them.
9. Paying too much up front
If your builder asks for more than a third of the contract price as a down payment, you need to be wary. At best, hes undercapitalized and cannot afford to purchase materials on his own. At worst, hes scamming you and has no intention of completing the work after you pay.
10. Burning your mortgage (literally)
Whilst it is truly an amazing feeling when you make your last mortgage repayment after all, the house is now completely in your name now is not the time to run out and hold a mortgage burning party. You need to keep hold of all mortgage documents, just in case.
If you are interested in engaging a luxury house builder to construct the house of your absolute dreams, it is essential that you avoid making all of the financing mistakes we have outlined above. This will not only ensure that the process goes smoothly, it will ensure that you can afford to make your mortgage repayments and that you still have money in your pocket at the end.