Buying a home is stressful enough, even if everything goes smoothly. So I want to show you eight things to avoid to ensure that you don't run into big problems when you're purchasing a home. These are things that many people do that they keep doing and it causes more problems and more stress in the future because real estate is stressful enough, to begin with. Let's make sure that we do everything we can. To make it an enjoyable process and a process that's fun to go through every few years, because you'll probably be a little tired of it after the first time you go through.
Let's go ahead and dive into it. Number one is going and spending above your budget. I've seen this in some comments and all over the internet where people get upset because mortgage lenders will allow people to borrow more than they're comfortable with. And what's crazy is they take the loan and they say, that's fine by me.
Here's the deal. If somebody said, you can qualify up to a payment of $2,000 a month, buy you know for certain that you can only pay a thousand dollars a month, don't agree to $2,000 per month. That's crazy. That's not the lender's fault. That's your fault for taking that money. Lenders have risk profiles that they allow according to the federal government in GSEs, a bunch of federal regulations.
Just because you're approved for that amount does not mean you have to pay that amount. It doesn't mean you have to buy a home that costs that much money. All right. So a big issue is people will get approved for a certain amount and then they just go and say, great, I'll go purchase a home. Have this super high mortgage payment. And then they become what's called house poor.
House poor means that you might have a great income, but most of the income is going straight to your housing, right? Don't spend above your budget. You have to know what your budget is. You're the one responsible for your finances and what your budget looks like. Make sure that you stay within that. Get quotes from your mortgage lender on different properties to see what that monthly payment is going to look like. So it fits in your budget.
A big mistake is not making an absolute needs list. Keep in mind that it is not just a needs list, it's absolute needs list. Because people say, make a needs list a lot, and it's easy to hear a needs list, and it goes straight out in one ear then out the other. It goes straight through us and we think, yeah, needs list. I know what my needs list is.
But what I'm talking about is an absolute needs list. A needs list is easy to put on, things that you need, but also things that you want. An absolute needs list is the non-negotiable things that you need. For instance, how many bedrooms do you need? How many bathrooms do you need logistically for you and your family? Are there other things that you absolutely need in that home? This is going to make your home shopping a lot easier.
If you don't do this, you're going to be one of those people who goes out and sees 20, 30 homes and still ends up finding nothing and saying the real estate market is all messed up. You need to have an absolute needs list. And that needs list needs to say it's going to say absolute needs list, and then you're going to put down your list of items that you say, these are the things that we absolutely need.
Then you can narrow them down with your realtor before you go and look for property, that's going to save you so much time, and so much stress. It's going to give you off the emotional roller coaster of getting excited to go see a property. You see a property, you're up here and now you're down here and then you get back up here.
It's a nightmare. Don't go through that emotional struggle.
Also, don't submit wildly low ball offers. This just offends the seller and it's probably gonna make it difficult to find a good realtor to work with. All right, now I get it. You want to purchase a home for a great cost. I completely understand. But the problem is sometimes people will see a $200,000 house and they think, let's put an offer for 80. Let's see how it goes. No good realtor is going to work with you long-term if you're going to waste their time and your time and the seller's time and the seller's realtor's time by submitting those offers.
You have to understand that real estate is a market. So obviously there is room for negotiation, but a seller is putting the house out there. They're saying, this is what we're asking for. We're asking for, let's say $200,000. They didn't just make up that number. They were saying we really need $200,000, and the main reason why they request a specific amount is that you have to keep in mind that they also have things that they have to pay off. They have expenses, they have a mortgage, they need to pay off, they have realtor expenses, and they have any closing expenses. And so there is a specific number that they have to hit to make sure that they're either going to profit or break even on the sale of their property. So super wild, low ball offers. Usually don't work.
Now, if you are looking to find a home for a great price, I would suggest talking with the realtor and they're going to have great options for you to see properties that might need a little care and attention that you can buy at a great discount. And also ask their suggestion on, if you do want to submit a lower offer, what are ways that you can do that? Because if you do submit a lower, then the rest of your contract needs to support it, right? If your contract is weekend price, it needs to be strong in other areas. For instance, you need to close faster. You need to ask for fewer contingency periods. If you have a low price. So talk with your realtor about that. Don't just submit super low offers. I talk with realtors all the time, who will fire clients because they cannot keep spending their time submitting offers that are half the value of the asking price.
Also, this is a big one. Big debt purchases. When you're going through the mortgage process. Once you get pre-approved, everything in your finances should be pretty locked down. Obviously, you can still use credit cards a little bit and you can still, you're still paying down debt, but if you go out and take new debt that is going to mess up your application, and if you're already under contract, then the underwriter has to re underwrite your loan.
If you have big debt purchases, like a new car, or you go and put thousands of dollars on your credit cards or you purchase furniture for a new house. If you do these things, it's going to slow down the mortgage process and make things very frustrating and complex. And I've seen people who will go and take out new loans or their purchase, something new. And then their loan gets denied because now they can't qualify with the new housing payment because they had more debt put in there.
Also, changing jobs. This is a big thing. Please don't do this. I did have a guy a couple of months ago. We were five days from closing and then he said, guess what? I just changed jobs, but I got to raise everything will be fine. And I said, no, we now need you at that job for an additional 30 days because we need to pay steps to make sure that income is solid before we can close. So we were five days from closing and now we have to wait another 30 days to get two pay stubs so that we could close on that home.
And he's lucky the seller let him extend the contract because if you go past your contract date, the seller can walk away. They don't have to give you an extension. Don't change jobs don't make any big changes to your debt or your income or anything like that because your loan is underwritten based on the consistency of your income. That's one of the most important things about your loan application is how consistent your income.
So if you change jobs, you change your employment. That effectively changes your income. Even if it's exact same, the underwriter has to guarantee consistency. So if you change jobs anywhere in that process, you're going to run into problems.
So I would highly recommend it. If you're under contract don't change jobs. After you get pre-approved don't change jobs, you're going to have to talk with your mortgage lender about the impacts of what job changes will look like. If you've had a job change within the past six months, make sure your lender knows about it. Or if you're planning on a job, change in the future six months, tell your lender about that, and make sure that they know so they can help you coordinate and find a schedule that's going to work.
Another thing is having unrealistic expectations in all areas. The biggest unrealistic expectation I see is in the timeline. You want to close on a home, but it's always frustrating for everybody else in the process when people don't have a realistic idea of how real estate works, especially regarding the timeline.
For instance, when you get under contract, it's probably going to take 30 days to close. And I can't tell you the number of people that I tell them, Hey, this is going to take about 30 days. And then they call me the next day and say can we close in like next week? No, it just doesn't work like that. There are a lot of moving pieces. And so you need to slow down and understand the steps. That way you can have an enjoyable process.
Real estate does not move when we want it to move because there are so many people involved. There are so many systems and so many guidelines that we have to navigate. And it doesn't move as quickly as we want to, and we just have to live with that. So we have to have realistic expectations about our timeline. We need to have realistic expectations about our money as well. It's always a little interesting to hear the differences between the purchase price they want and how much they want their monthly payment to be.
For instance, if you're buying a $400,000 house, I'm sorry, but your payment is not going to be a thousand dollars per month. You need to have realistic expectations of what your payment looks like versus your purchase price, along with what your down payment looks like. A lot of people still think there are tons of first-time homebuyer programs.
There are a few, but most of them are really costly. They don't exist as they used to before the housing crash. That's why a lot of those programs don't exist anymore is because they caused a housing market crash. It caused an economic, a small economic collapse, right? Some of these programs did.
One of the best ways to do that is what you're doing right now. Watch a video, and get educated on what the process looks like.
So one of the best ways to avoid unrealistic expectations is to ask questions. If you don't know, ask questions, ask people to explain things, and ask to understand the process. This is going to help you so much in the future to manage those expectations.
If you have any cash on hand or anything that gets deposited into your bank that is more than what you regularly deposit in your bank. This is called a large deposit mortgage lenders will want to know where that money came from and the reason why it's super annoying, but ever since the Patriot Act came into play mortgage lenders now have to look at bank statements to see any large deposits so that they can spot money laundering and terrorism, alright? It's very frustrating.
Because most of the time people put money in their bank account cause they got cash or they got a gift or something happened. Maybe they sold a car and now that deposit has to be tracked and documented. And if it can't be documented, then that money can not be used.
So if you have a large amount of money that you're going to deposit into your bank account within the past two months, let your lender know about that because that's going to have to be documented or you're going to have to find another way to come up with those funds because you can not use undocumented money, right? So you can't use cash.
And most cash can't be tracked. So it's very difficult to use that in a mortgage transaction. One of the best ways to determine large deposits is if it's 50% or more of your monthly income. Some lenders will even drop that down to 25% or more. It just depends on the lender, but avoid large deposits.
Finally, avoid stressing too much, right? One of the best ways that you're going to avoid that stress is by what you're doing right now. Again, understanding all the steps in the process and getting educated, having a solid game plan moving forward, but things in life happen, right? As much as we want to control them, as much as we want to have a tight grip on things that happen.
There are so many moving pieces in real estate, and sometimes we have to say it is what it is. What do we do now? It's easy to get frustrated. It's easy to get overwhelmed, but it seems like when, whenever we grab on to something, the tighter we hold, the more it breaks the thing under our grasp.
So take a deep breath. It's going to be okay, get a plan, learn, ask questions, and get people around you. Have a team. Then start to move forward, relax and try to move at a consistent pace. Allow other people to help you. The more that you get sucked into this isolated world of holding tight and feeling like you have to be in control of things, the more stressful it's going to be, the less fun it's going to be and the more difficult it is to win the house that you love.
So I hope this gives you a good idea of what not to do when buying a home. Sometimes it can feel like you're navigating a lot when purchasing, even when things go right because so many changes happening, but do what you're doing. Keep learning, get people on your team, ask questions, make a plan, and you'll be on the right path to win the house you love.
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