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When buying a house, you don't want to pay more than you should, either for the home or in unnecessary purchase costs. Follow these simple steps to avoid making a costly home-purchase mistake:

  • GET PRE-APPROVED IN WRITING BY AN ACTUAL MORTGAGE LENDER.

    The first key to a successful home purchase is to get pre-approved in writing by an actual mortgage lender. Such pre-approval can be arranged by a mortgage broker, direct lender credit union or bank or a mortgage banker.

    But don't be satisfied with just a so-called mortgage "pre-qualification." That means nothing and is not binding on an actual mortgage lender.

    A lender's pre-approval letter or certificate means the lender is obligated to make a home loan to you up to the maximum stated amount, subject only to reasonable contingencies such as (a) satisfactory appraisal of the home and (b) rechecking of the borrower's employment and credit. But watch for deadlines, such as a 60-day loan commitment and interest rate lock-in periods.

    Before applying for a home loan, however, savvy buyers obtain their credit reports and FICO (Fair Isaac and Co.) scores. If there are any problems, such as incorrect credit information, it's best to fix the error before applying for a mortgage. The easiest place to obtain a credit report and FICO score is on the Internet at www.myfico.com. The very reasonable fee is $12.95, and the service includes suggestions on how to improve your FICO score, which lenders rely on to approve a home loan.

  • WORK WITH A QUALITY BUYER'S AGENT TO BUY YOUR NEXT HOME.

    After being pre-approved in writing by an actual lender (not by a mortgage broker who is just a middleperson between you and the lender), the next step is to work with a quality buyer's agent to find the right home. Ask friends and business associates who have recently purchased a residence for agent recommendations.

    Be sure the buyer's agent is experienced with home sales in the neighborhood you are considering. If you're looking at homes in different areas, such as the south and north sides of town, don't expect a buyer's agent to be qualified in both.

    Although most buyer's agents are compensated by receiving 50 percent of the home listing agent's sales commission, avoid misunderstandings by discussing this issue up-front. If your buyer's agent asks you to sign any contract, be sure it is not for more than 30 days (just in case the agent is a dunce).

    Ask your buyer's agent how he/she would handle a "for sale by owner" situation if the home seller refuses to pay the agent half the customary sales commission. You might get stuck paying your buyer's agent's commission if the do-it-yourself seller won't pay.

  • BEFORE MAKING A PURCHASE OFFER, INSIST YOUR BUYER'S AGENT PREPARE A COMPARATIVE MARKET ANALYSIS.

    When a home is listed for sale, the listing agent usually prepares a comparative market analysis (CMA) for the seller. This form shows sales prices of similar nearby homes that sold recently. It also shows the asking prices of competitive neighborhood homes currently listed for sale, as well as asking prices of recently expired nearby home listings.

    Buyers should insist their buyer's agent also prepare a CMA before making a purchase offer. An experienced buyer's agent will have inspected all the homes shown on the CMA and can help a buyer make a fair offer on the home being purchased. Without a written CMA, buyers could get ripped off by offering too much for the home.

  • AVOID BUYING A "BAD HOUSE."

    The worst home-buying rip-off is buying a bad house with serious, undisclosed defects. Although sellers and their real estate agents are supposed to disclose in writing all known home defects to buyers, a few sellers "forget" to disclose serious problems. Can you imagine that?

    For example, in a recent California Court of Appeals case (Johnson vs. Siegel, 101 Cal.Rptr.2d 412), the seller neglected to disclose in the written disclosure form that every time there is a heavy rain, the home's garage and living area flood. Neighbors told the buyer the seller was well-aware of the serious problem.

    To minimize the possibility of buying such a "bad house", insist the seller provide a written disclosure of any defects. In addition, savvy buyers avoid being ripped off by making their purchase offers contingent upon their approval of a satisfactory professional home inspection report by an inspector of their choice.

    The best home inspectors are usually members of the American Society of Home Inspectors and can be located at www.ashi.org, (800) 743-2744, or in the phone book yellow pages under "home inspectors" or a similar heading.