N a v i g a t i o n

Financing Do's and Don'ts

Buyers who do not have a property sell are at advantage in a buyers market, since they are stronger buyers without the contingency of selling their current home. When buyers hear that the real estate market is bad then it is the time to buy just as when everyone believes you should buy it is not the best of markets for buyers,. In bad real estate markets buyers can buy at a discount and they are the markets where buyers will make the most money because they brought into the market at the right time. Those buyers who follow the herd are destined to buy the leftovers.

Order a copy of your credit report and make necessary corrections.

Review your report and report all errors on the report. Get previous lenders to make necessary corrections if any. Review all negative factors on the report and take steps to improve your credit score if it falls much below the national average of 670. Be very careful, steps that you might think will improve your credit score may actually lower it. An example may be to pay off all your credit cards, while might seem like it would improve your score but it could actually lower it. The ideal U.S. credit risk has a 37% balance of  their their available credit limit with an average of two (2) credit cards. Closing too many credit card accounts would be wise, but like anything moderation is best. Remember that an unused credit line on credit cards will lower your borrowing power with a lender therefore a very large credit line or a lot of credit cards are not good for your borrowing beauty quotation. Because Fannie Mae and other secondary mortgage market makers purchase most of the mortgages that bank and mortgage lenders write they require the lenders to meet certain standards, so most of the mortgages have similar risk. In short, it is best to be as close to the so called ideal borrower profile as these large institutions want to see. This will maximize the number of lenders that want your business and therefore the lower the rate they will offer you to borrow with them. 

No Major Purchase of Any Kind.

Review the article titled, "Don’t Buy a Car," and apply it to any major purchase that would create debt of any kind. This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings… …and automobiles, of course. By minimizing your monthly expenses you maximize your borrowing power with the lender. Your DTI ratio is the main lending barometer to determine your fiscal health. The rule of thumb for most debt is that level -- including mortgage and all revolving unsecured debts -- should not exceed 36% of your gross monthly income.

Don’t Move Money Around.

When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.

The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer.

Oh…don’t change banks, either.

Do Not Change Jobs.

For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money.  For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application. Younger buyers without long job histories a number of recent job changes can be the difference between being approved and not being approved for enough to purchase the property you wish to purchase.

Get Pre-Approved for your financing.

This will give you the ability to move fast on a property without a lot of conditions that will make your offer less attractive to the seller. This will also give you a budget for your home purchase, so you can add the taxes and insurance costs to determine what each property will cost you monthly before you make an offer. Provide an estimated cost for the closing ( avoid sticker shock at the closing ) both known costs and unknown costs. Remember you will need to pay for title insurance ( this is to protect the lender only ), the attorney, mortgage points ( if any are required ), mortgage insurance ( if needed usually required if down payment is less than 20% ), title insurance for the purchaser ( if desired ), pre-paid taxes ( remember taxes on the property already paid by the seller are prorated for the amount of time the title stays in their name ), oil ( you will be charged for oil in the tank for oil fired furnaces ) and other fees or encumbrances. Remember budget for the closing because the expensive can be considerable.

Select A Real Estate Agent.

Remember the real estate agent or agents are paid by the seller. An agent is an independent  professional that will save you time and money, so not having one will cost you and having one will make a home purchase less stressful. Remember, if you are the buyer not having an agent does not save you any money. Not having an agent is like going to court to face a felony charge that carries a long jail sentence and having a major defense attorney come up to you to offer his services for free and you tell him it's alright I defend myself. Your agent can assist you in locating properties in the geographic area that meet your specifications for features and price. They can arrange for appointments to tour the selected properties with the owners and the owners agent. An agent may be helpful pointing out issues with each property that you may have overlooked that will affect the value of each property. They can assist you in preparing a competitive offer that will both protect you and help make your offer successful. An offer to a buyer is a contract once the buyer accepts the offer, so use professional advise to prepare your offer.

Select A Geographic Area that you want to purchase in.

Your agent will have access to a lot of information that may help you select an area to search in. The price range for any given area will be one of the most significant reasons for looking at one town, city or local area over another. Your agent can provide a list of areas that have recent home sales that meet your requested features list that will be within your budget range. Once you have a number of towns that you can afford to purchase in you may wish to look further into to each of these areas to determine which one suits your needs best. Information about each town and city is available, but an agent's knowledge of each area may be more valuable then those you will find documented. 

Select Properties to Visit.

Review the agents MLS website or printed listings of available properties. Your agent will do most of the leg work to set these appointments up. Make a list of questions you have about the property before you visit and add any additional questions you still have after the visit ( Your agent will probably do this as well, so merge your lists ). Your agent can then get answers to any questions that could not be addressed to the owner or the owners agent at the time of the visit.

Make an offer.

Review the property that you are interested in with your real estate agent. They can advise you as to what they think a successful offer would need to be for price, conditions and terms. In the end this will be your decision, so give it careful thought do not rush but be prompt with an offer. Inform your agent if you definitely intend to make an offer they can inform the sellers agent that another offer is to be tendered. If the seller has received another offer with a time limit or if they are about to decide to accept an offer they may wait because even if your offer is better you may be too late if they have already accepted another offer.

Home Inspections and Insurance.

Before you close on the property you need to do several things including home inspection, radon testing, insect inspection, homeowners insurance, title search and any additional requirements of the lender. Other inspections if required by the city, town or state before occupying the property (Example: Final inspection on a new home or building by city or town to obtain a certificate of occupancy to move into or use the property.) 

Close on the Property.

Before closing on the property be certain that all the paper work that you are responsible for is complete and all requirements to close have been finished. You will not be able to close unless everything is completed successfully, such as mortgage financing, homeowners insurance, title search and any other contract requirements. Once everything is signed and the deed is delivered to the town clerk for recording you are a property owner.

After Closing on the Property.

Before moving into your new home or shortly thereafter you will need to arrange for moving services, transfer the utilities into your name, make any necessary repairs, turn any alarm services on, transfer if necessary children's school records and register them in new school, change address with the Post Office for mail forwarding to your new address, change address on other accounts and subscriptions. Address notifications and telephone numbers  including ( employer, insurance policies, medical policies, drivers license, car registration, your school, memberships, emergency notification information, family and friends. ).