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12 Most Common Home Buying & Building Mistakes

Let's face it. When it comes to building a new home in Central Texas, you're going to want someone who knows the home building industry inside and out - someone who knows how to troubleshoot home construction schedules, obtain mortgage financing, assist with home design and selections, and most of all - someone you trust. Without any one of these critical elements, the entire home buying process if faulted from the very beginning. Building a new home in Central Texas isn't all that difficult, but experience certainly counts. This experience will help guide you through the maze of the home building process and the wealth of paperwork and documentation that comes with purchasing property and building the new home of your dreams.

Building a new home in Central Texas should be a great experience. It certainly can be. However, more often than not, home buyers considering new homes often overlook even the most obviously critical elements that will later serve as a strong foundation for building their new home. Things like interest rates and special home financing programs designed for new home building, the quality of the home's components, the home builder's construction methods and reputation in the community, and how well that builder might listen and communicate with you - the home buyer.

Like you, I've also been in the same position you're in. In fact, I'm that position almost daily. As a Buyer's Agent specializing in new home construction, I see other home buyers make the same mistakes you're about to make - many of which can be prevented with thorough planning and the proper amount of attention given to just the right places. Unlike anyone else I know, I only represent home Buyers and specialize in primarily new homes. There are a few of us, but certainly not many, especially when compared to your typical real estate agent or Realtor.

To assist you, I've assembled The 12 Most Common Mistakes Made By Potential Home Buyers While Building A New Home in Central Texas. Please take the time to read this carefully. It could just save your financial integrity and happiness:

Beginning The Home Construction Process Without Being Pre-Approved

As a potential buyer competing for a property in your preferred area, you'll have a better chance of getting your offer accepted by being as prepared as possible. Consider this hierarchy of financial preparedness:

        Pre-Approved (Best)

        Pre-Qualified (Average)

        Neither Pre-qualified nor pre-approved (worst)

The benefits available at each level can be easily understood when viewed from the home seller's or builder's perspective. Imagine you're a seller in receipt of multiple offers to purchase your home in Central Texas. A complete stranger (home buyer) is asking you to take your home off the market for at least the next two to three weeks while they apply for a loan. As the home seller, lets consider the type of buyer you'd prefer to deal with. Central Texas home builders generally feel the same way.  Before you talk seriously with a home builder, take the time to get pre-approved.

Neither pre-qualified nor pre-approved. This home buyer provides no evidence that they can afford to purchase your property. You may wonder how serious they are since they're not at least pre-qualified.

Pre-qualified. This home buyer has met with a mortgage broker (or lender) and discussed their situation. The home buyer has informed the mortgage broker regarding their income, expenses, assets and liabilities. The mortgage broker may also have seen their credit report. The home buyer provided you with a letter from the mortgage broker stating an opinion of what the home buyer can afford.

Pre-approved. This home buyer has provided a mortgage broker written evidence of income, expenses, assets, liabilities and credit. All information has been verified by a mortgage lender. As a result, much of the paperwork for this home buyer's loan has been completed. This home buyer will probably be able to close quickly. They provide you with a letter (pre-approval certificate) from the mortgage lender. You're as certain as possible that this home buyer can close.

As a potential Central Texas home buyer, you can see that being pre-approved will give you the best chance of getting your offer accepted. This is critical in a competitive situation.

Not Researching Potential Home Builders

A good Central Texas Buyer's Agent can help. Now, when I say the words "Buyer's Agent," I'm talking about a real estate agent who never represents home Buyers, builders, or sellers in the same transaction. Preferably, you're going to want someone who specializes in new home construction in Central Texas, knows the reputation of local home builders, and represents your interests and your interests only. Now, before you go and think about how much all of this is going to cost, let me tell you right up front, most of the services Buyer's Agents provide are usually free. That's right, they normally don't cost you anything.

Not Hiring An Experienced Buyer's Agent Specializing In New Home Construction

Although we're very few, there is a group of real estate professionals who primarily only work with new home buyers. These are more than just real estate agents, they're Realtors. Any agent can write contracts and show you homes, but only a Texas Realtor (someone licensed by the Texas Real Estate Commission) and Central Texas Buyer's Agent who specializes in new homes will be able to deliver the kind of service and support you're going to need. These agents possess experience, knowledge, and depth.

Making Verbal Agreements

If you're asked to sign a document containing instructions contrary to your verbal agreements--don't! For example, the home builder verbally agrees to include the washing machine in the sale, but the written purchase contract excludes it. The written contract will override the verbal contract. More importantly, the State of Texas requires that contracts for the sale of real property be in writing. Do not expect oral agreements to be enforceable.

Choosing A Lender Just Because They Have The Lowest Rate

While the interest rate is important, consider the total cost of your loan including the APR, loan fees, discount and origination points. When receiving a quote from a mortgage lender or broker, insist that the discount points (charged by the lender to reduce the interest rate) be distinguished from origination points (charged for services rendered in originating the loan).

The cost of the mortgage, however, shouldn't be your only criterion. Have confidence that the company you select is reputable and will deliver the loan with the terms and costs they promised. If in the final hours of the transaction you determine that the lender has suddenly increased their profit margin at your expense, you won't have time to start again with a different lender. Ask family and friends for referrals. Interview prospective mortgage companies. It's best to use a well known local lender from for your Central Texas home loan if one is available.  We do not recommend pursuing Adjustable Rate Mortgages (ARMs).

Not Receiving A Good Faith Estimate (GFE)

Within three business days after the mortgage broker or lender receives your loan application, you must receive a written statement of fees associated with the purchase of your new home. This is both the law and the best way to determine what you'll pay for your loan. Bring the Good Faith Estimate (GFE) with you when you sign loan documents. You should not be expected to pay fees which are substantially different from those contained in your GFE. If you're using a local mortgage lender, your Realtor should be able to tell you how accurate the lender's GFE really is.  If you're using a mortgage lender from across the country, only time will tell.

Not Getting A Rate Lock In Writing

When a mortgage company tells you they have "locked your rate," get a written statement detailing the interest rate, the length of the rate lock, and program details. You'll find that some mortgage lenders will charge you to lock your rate.  You'll also find that other lenders will charge you (in points) if you decide to abandon them and go with a better lender.  Ask for everything in writing up front and don't be surprised later.

Using A Dual Agent -- An Agent Representing the Buyer And The Builder or Seller In The Same Transaction

Another one of my favorite subjects.  Here it is, up front and simple....

***Have your own representation when buying or building a home!***

I can't stress enough how important this is. When you walk into a home builder's office in Central Texas, or talk to a real estate agent who has a sign in the front yard, you're talking to the person who represents the home builder or owner. That person's sole mission in life is to obtain the highest price for whomever they work. Home buyers and sellers have opposing interests. Home builders want to receive the highest price, home buyers want to pay the lowest price.

In the standard real estate transaction in Central Texas, the home builder pays the real estate commission. When an agent represents both buyer and builder, the agent can tend to negotiate more vigorously on behalf of the builder. As a home buyer, you're better off having a real estate agent representing you exclusively so that your interests are protected.

Buying A Home Without Professional Inspections.

Old or new, I highly recommend that you get property, roof, and termite inspections. This way you'll know what you are buying. Home inspection reports are great negotiating tools when asking the home builder to make needed repairs. When a professional home inspector recommends that certain repairs be done, the home builder is more likely to agree to do them. If the home builder agrees to make repairs, have your home inspector verify that they are done prior to close of escrow. Do not assume that everything was done as promised.

Not shopping For Home Insurance Until You're Ready To Close

Start shopping for home insurance as soon as you have an accepted offer. Many Central Texas home buyers wait until the last minute to get insurance and do not have time to shop around. Keep in mind that your home insurance company's reputation matters as much as the rate they're quoting you.  It doesn't do a bit of good to have the cheapest insurance policy in the world if your insurance company will never settle the claim.  Ask your friends, coworkers, and family who they use for home insurance.  You'll get the inside information on how they treat their home owners.  You can also contact me for a complete list of home insurers who are currently writing the kinds of policies you desire in Central Texas, Texas.

Signing Documents Without Reading Them

Whenever possible, review in advance the documents you'll be signing. Even though some specifics of your home purchase may not be known early in the transaction, the documents you'll sign are standard forms and are available for review. It's unlikely that you'll have sufficient time to read all the documents during the closing appointment, so don't be surprised if the title company expects you to rush through them.  The best way to ensure accuracy is to have your real estate attorney review all documents prior to closing.  You'll be glad you did.

Not Allowing For Construction Delays

In a perfect world, all real estate transactions close on time. In the world we live in, home purchases are often delayed a week or more, and sometimes, even longer. Suppose you asked your landlord to terminate your lease the day your purchase transaction was scheduled to close. A day or two before your scheduled closing date, you discover your transaction is delayed a week. In a perfect world, no one is inconvenienced and your landlord is willing to work with you. More likely, however, your landlord is inconvenienced and angry. Will you be thrown out? Will you have to find interim housing for a week or more in Central Texas? The eviction process takes a little time, so the Sheriff won't immediately remove you, but this type of stress-producing episode can be avoided. How? Terminate your lease at least one week after your real estate transaction is scheduled to close. That way, if there is a delay in closing your transaction, you have some leeway. This approach might cost a little more, then again, it might not.

I sincerely hope that this has at least given you a few ideas on the important aspects of shopping for new homes and builders in Central Texas, Texas. Quite obviously, there are hundreds of other components that are critical to your success that aren't covered here. Please feel free to contact me either via email or directly by phone if you have items that you'd like to discuss in person.

Thank you for your interest in new homes and Happy Building!