You’ve put so much time, money, research, blood, sweat, and tears into finding your dream home, you don’t want the deal to fall apart at the last minute.  A survey by the National Association of Realtors® found that 1 in 16 home deals fall through.  Here are a few of the most common reasons a deal can go sideways, and how to avoid them.

Not Getting Pre-Approved

You’ve been shopping for houses for months, found your dream home, and your offer was accepted!  But you never spoke with a lender about your loan options, and now you realize you don’t qualify for the purchase price you offered.  There’s no choice but to cancel escrow.

Getting pre-approved with a lender is your first step when you’re serious about buying a home.  This initial review will let you know if there are any problems with your credit, and will give you a price range to target when looking at houses.  Most sellers in competitive areas will require a pre-approval letter to be included with your offer.

How To Prevent It

• Shop around with several lenders to get an idea of the types of loan programs that are available to find one that fits your situation
• Go through your chosen lender’s pre-approval process and get a pre-approval letter indicating your maximum loan approval estimate

Change In Credit Score

If you’ve done your homework, you know that your credit score is a very important piece of the mortgage equation.  After you’ve taken the steps to beef up your score, don’t let it fluctuate between applying for a mortgage and the close of escrow.  Even one missed bill payment could lower your FICO score and increase your mortgage payment, or even make you ineligible for the mortgage.

How To Prevent It

• Stay diligent in managing your bills and maintaining good credit practices
• Don’t “ding” your credit by opening new credit lines, running up card balances or taking out additional loans
• Don’t close any credit cards.  Closing a card can hurt your debt-to-income ratio (DTI)

Poor Money Management

Besides your credit score, your income and savings will be scrutinized by your lender before they issue the loan.  Generally, your money needs to be “seasoned.”  The lender likes to see a stable balance in your account for at least a few months.  Large fluctuations or a sudden decrease in funds may affect your loan eligibility.

Also remember the down payment is not your only expense!  Closing costs and loan fees can be another 1%-3% of the purchase price.

How To Prevent It

• Talk with your lender and REALTOR® to get a good idea of the amount of cash you need to close
• Keep track of your finances and establish a budget
• Setup a separate savings account for your home and don’t touch that money for anything else
• Don’t make any large purchases and stick to your budget until escrow closes
• Speak with your lender before accepting any gift funds from family or friends

Getting Spooked By The Home Inspection

The home inspection is a buyer safety-net to make sure you’re not buying into a mess of problems.  But unless the home is brand-new, it’s not going to be perfect.  The inspection period can be a delicate time as buyers get picky and sellers get emotional.

How To Prevent It

• Try to remain objective and unemotional when evaluating the property
• Negotiate with the sellers to come to an amicable compromise about how to approach property defects.  Options include dropping the purchase price, having the seller make the repairs, and crediting the buyer the cost of repairs at the close of escrow
• Before cancelling the deal due to a minor or even major property defect, get an estimate too see how much it would really cost to take care of it yourself
• Expect that there will be some natural “wear and tear” on the property, especially if the home is 50 years or older

Getting Cold Feet

You’ve found your dream home, your offer was accepted, and now you’re imagining your furniture in all the different rooms.  That excitement high will slowly wane over the next few weeks as you are bombarded with details of the home inspection, loan documents, legal documents, seller disclosures, notaries, and more and more paperwork!  By the time you are poised to drain your entire bank account in one fell swoop, the panic sets in.  “What am I doing?!!”  Second guessing your decision is normal. 

How To Prevent It

• Due Dilligence.  Find out as much as you can about the property (including physical defects, public records, local market information, etc)
• Make informed and objective decisions
• Make a pros and cons list
• Ask your Realtor® for advice