Factors that could derail your plan for a home purchaseJuly 28, 2019
Finding your perfect home that befits your requirements is a long process. And when you have finally located the home of your dreams and have proceeded further till the stage of buying it there could be certain factors that could derail the home buying process. Apart from the complexities of property-buying process, here are some of the key factors to watch out for if you plan on purchasing a home:
1. Debt-to-money ratio
Homebuyers should have a balanced debt-to-income ratio (DTI) as money lenders would do a last-minute credit check before closing, in order to verify that they have not taken extra debt and is capable of repayment. Making large expenses on your credit card will bring down the credit rating of the homebuyer whereas taking large debts during the time of closing the transaction will raise the homebuyer’s DTI. As a result, the risk for approval of loan also increases, challenging the payment procedure.
2. Changing jobs
A job change or getting fired from work will throw your mortgage into jeopardy. Even after getting placed at a different company with an upgrade in salary, there are chances that the loan would get disrupted. This, it is important that you notify the lender about job changes, if any, to help him verify about such cases within a day of closing and for those who are planning to retire, avoid doing so soon after the closing of mortgage.
3. Defects in home inspection
Any serious problems that are revealed during home inspection help the homebuyer to back out without incurring any penalty. This is applicable, if and only, such a clause is mentioned in the purchase offer regarding inspection contingency. You are likely to lose money even if you don’t include this in the contract, even if you decide not to buy.
There are sellers who only accept offers from buyers who get preapproved or get a written loan commitment from a bank which agrees to provide the buyer with a mortgage of certain amount. Certain instances that could prevent the closing of a loan such as a change in employment status, decline in credit score, sharp increase in interest rates or misinterpretation of data in the application will challenge the financing of a property. In order to mitigate such risk, homebuyers should stay ahead in the process by returning necessary documents promptly and by confirming that every payment has been cleared before closing day.
A home at a high-risk area that is prone to natural hazards like floods, earthquakes, fire or seismic hazards become a major factor for all homebuyers to derail from home buying plan. Taking hazard insurance will insure your home against such mishaps but purchasing the same is expensive. Also, it will only add up to the total cost apart from the extra expenses on purchase, pushing the homebuyer to have second thoughts on owning the property.