The private sector and government leaders must be on guard as trillions of public dollars wash through the economic system and a broken economy can become a feasting ground for unsavory opportunists

Could “iBuyers cause the next S&L style crisis, how can realtors help! The public only believes what they want to believe hence why people will take out their life savings and give to scammers over the phone

I will try not to bore you with too many facts, I’ve provided enough for you to drill down and investigate on your own.

While working Broker Price Opinions for asset managers from 2009 thru 2014 Germany’s Deutsche Bank seemed to populate the industry. Then a bold well-written, “Non-fiction” business book about a white-collar criminal scheme can be a book you will not put down! By David Enrich’s book Dark Tower. Another “The Spider Network!”

The worst part of these stories is how many banks and their lavishly paid executives enriched themselves at the expense of others.

One political issue that has enjoyed “BI_PARTISAN” support over the last 40 years is allowing Wall Street to have its way with laws and regulations. President Regan deregulated the banks, President Clinton erased the 60 year old Glass Steagall Act. Both President Bush and Obama followed the same hands-off policies, but they also acted quickly to bail out big financial institutions that were guilty of fueling the subprime loan crisis.

The private sector and government leaders must be on guard as trillions of public dollars wash through the economic system and a broken economy can become a feasting ground for unsavory opportunists.

The good news is that everyone will receive a report card on their behavior during the COVID-19 lockdown and its aftermath. Today, transparency is a powerful watchdog. Consider the rapid backlash against companies that tried to unfairly enrich themselves from the Payroll Protection Program loans. Thanks to the sunshine, companies were busted with shame and bad public relations and in a few cases, arrests.

Real estate is again ripe for bad deeds

In our industry, chances are that mortgage forbearance will turn into foreclosure, and that always brings out some shady characters.

Low-level, white collar crime is common when it comes to housing shenanigans. But the big players can wreak the most damage by taking advantage of vulnerable homeowners, while never breaking the law.

iBuyers are back, for example, which is leading the way with billions of dollars from private equity. But the context has changed in the last couple of months, as we begin to see more desperate owners and anxious sellers. When iBuyers launched several years ago, vulnerable homeowners were not the backdrop because the market was healthy and the economy strong. That could change quickly, as the housing market becomes more precarious.

Historically, private equity funds are eager to buy up foreclosed homes or houses from troubled sellers with little concern for the consequences. This time, they can move more quickly with vehicles like Zillow, Offerpad, Opendoor et al. While partnering with Wall Street has rewards like ready access to capital, these tech companies must also be faithful guardians of the public trust. If private equity becomes predatory, the alarms should go off.

Realtors are one line of defense

Realtors must interject themselves in the iBuying equation to ensure sellers are protected from what could be an unseemly partnership. The commission dollars may be smaller, but never has the agent’s role been more important.

During the foreclosure mess 10 years ago, real estate agents played a vital role helping all parties. Many helped local banks unload properties, or they protected buyers on the other side. In other cases, agents worked with sellers who faced foreclosure with solutions such as short sales to free them from bad credit down the road. Realtors did not cause nor could it stop the misery, but they could help people navigate the mishmash.

Sticking companies with big debt payments, private equity has also had a hand in destroying businesses, when it swoops in and buys companies. And the government has provided generous tax breaks to enable such sales, many of which are questionable deals that hurt otherwise healthy companies.

Too much debt suffocates innovation

When the housing market collapsed in 2010, its debt forced Realogy to make widespread layoffs and hampered its brands from innovating. As an example, companies like Coldwell Banker and Century 21 were once powerful online consumer destinations, but they lost out to Zillow and Trulia when Realogy stopped innovating. It had no other choice but to partner with the two big portals.

Many managers inside these brands often rant about Compass. But ironically, it took its playbook from the original Realogy roll-up. And the franchisor’s hobbled position made it easier for Compass to steal share quickly. 

Regardless, the carnage and missteps like we saw during the last recession will happen this time around. It is too early to know what mistakes are being made and by whom. When you are in the middle of the fireball, it is difficult to see clearly.

In the end, we should not hamper a free market or even consider putting an end to capitalism. That would be stupid. But we should curtail Wall Street’s heavy-handed political influence and its generous tax breaks that serve no public purpose. And we need better protections and policing to prevent fraud, to slow down real estate predators and to crack down on corruption. Then, let the free market run its course so entrepreneurs can thrive, and so new businesses can be created from an abundant source of capital to fund these enterprises.

Credits go to Brad Inman, and my experiences in the Real Estate Market Place.

Today, a lot of buyers are making decisions from afar, and sellers need to step up their game when it comes to prepping their homes for sale. How can we help virtually?

Here is a brief synopsis of the protocol I will manage with my sellers! We will cover more detail in a call!

Despite many states and localities lifting stay-at-home restrictions on various levels, the days of in-person visits to a seller’s home may still be sidelined for now. With the real estate buying process largely going virtual, you’ll have to step up your game when it comes to prepping your home for sale.

It’s critically important that how a home shows online translates to the way it looks in person (or better). So, in our “NEW NORMAL” of social distancing, how can we as agents better prepare our sellers from afar? Here are eight ways to virtually prep a home for sale.

1. Send pictures

I ask you as the seller to take pictures and videos of your home and send them to me. This should include shots of the exterior as well as the interior of all rooms in the house.

2. Schedule a video walk-through

If you or someone in your household — have the technology to communicate by video, let’s schedule a “Virtual Walk Through! where you can take me through the home “LIVE.” This way I can walk with you through the various areas of your home, we’ll have a conversation from my notes I’ve developed from the pictures you sent and perhaps offer suggestions.

3. Follow up with a list of action items

Preparing a home for sale is not an easy thing to do in person under the best of circumstances, let alone Virtually. There’s a lot of information flowing back and forth.

To recap what we’ll discus, I’ll send you in an email, a list of recommendations, room by room. Essentially creating a “prep for sale” checklist that you a seller can refer to so we don’t forget anything.

4. Remember that a picture is worth a thousand words

Whether in fashion or home decor, having visuals always helps. The same goes for getting your home ready for sale. I’ll send examples of competitive, well-presented properties that are active, under contract or recently sold within the last six months in the vicinity of your home. This will give you an idea of the look we’re trying to help achieve.

5. Send post-prep-work photos

After the prep work has been done, send me your photos and videos showing the changes you’ve made or propose. We’ll make notes of any items that may need adjustments, and brain storm ideas!

6. Schedule an in-person visit before going live

Prior to me scheduling a photographer taking photos. Let’s schedule a walk-through to review everything in person and go over”showing protocol!” We’ll have a conversation on how I will manage showings and who will be responsible for protective gear. Will it be myself or a person on my staff entertaining the showing for the buyers and or their agent. I may provide the wipes, and hand cleaner or if you feel more comfortable you may use your own and cleansing whips.

7. Take my own photos, and do a video walk-through on my phone

I’m finding that it’s best to schedule taking the photos and videos until we can arrange an appropriate time for everyone to meet the photographers and obtain pictures and video, it may be helpful to have a quick repository of photos and video content that I can send to potential prospects.

8. Besides photos, consider video, aerial and 3D

In today’s market, many buyers are making decisions from afar. The more options we use to showcase your property virtually from all angles, the better chance your property has to sell faster and for top dollar. This is why the way you prep your home “Matters” now more than ever.

This is a brief synopsis of some of the preparation we’ll begin with. Once we have a conversation I will share more explicit avenues, and detailed matters with you. I want your home to sell for the highest and best offer in the shortest amount of time. This is what I do best.

Where’s my Lawyer

There are no hard and fast rules with rent to own.

Unlike traditional real estate transactions, rent to own arrangements are more personalized and flexible. This can be a good thing or a bad thing. It can be a good thing when you make an arrangement with the seller that is fair and beneficial to you.

It can be a bad thing if you do not pay attention to the contract you sign—because you can quickly get yourself into a deal with unfavorable terms where you see little to no benefit, and the seller sees all the positives.

You will need to negotiate a contract.

All real estate transactions involve contracts and rent to own is no exception. You need to do your homework to make sure you understand what should be included in the contract and what the terms should look like.

You are negotiating a business deal, so you need to be careful. It is an excellent idea to hire a real estate attorney to look over the contract and explain it to you, so you avoid entering a deal that you do not understand.

Know your contract terms and how they will affect you.

  • Lease term. The lease term defines how long the lease will last before you will need to buy the home or move out. You and the seller can agree to any lease term you like. Most rent to own lease terms range from one to three years. Be realistic about how long it may take you to get ready to buy—including repairing your credit and saving up for a down payment. A one-year lease term may not be long enough for you to get your finances in order.
  • Option fee. This is the fee you are going to pay the seller for the option to buy the home. The option fee is usually something you can negotiate. Typically, the cost will range between 2 percent and 7 percent of the purchase price of the home, although it can be lower or higher depending on your individual circumstances. Sometimes the option fee can be applied to the purchase price of the house, again depending on what you negotiate with the seller.
  • Lease option or lease purchase. You have two different options when it comes to a rent to own agreement—a lease option or a lease purchase. You want to be confident what your contract says here because there is a big difference between the two. A lease option means you will have the right to purchase the home at the end of the lease. You can buy or not buy. A lease purchase agreement means you are legally obligated to buy the house at the end of the lease. If you do not have the financial means to buy the home or do not want to buy the home at the end of the lease, a lease-purchase agreement will put you in a challenging position.
  • Rent credit. In a rent to own agreement, it is standard for some portion of your rent to go towards the down payment on the home. Usually, the rent credit ranges between 10 percent and 25 percent, but again, it all depends on what you negotiate with the seller. There are no hard and fast rules for the rent credit. You should insist that the rent credit is kept in an escrow account to protect you and the seller.
  • Purchase price. Some rent to own agreements establishes the purchase price when the contract is written at the beginning of the lease. Other contracts state that the fair market value will be determined at the time of purchase. Either way, you want the decision on the purchase price in the agreement.
  • Maintenance. You can negotiate who is responsible for the property maintenance, both everyday maintenance like mowing the lawn, and significant maintenance like replacement of the roof, or the HVAC system. Major maintenance is expensive, so be careful about what you agree to. Either way, you should get a home inspection before signing the agreement.

  • KNOWN EXPERIENCES! I had a client call me because he had added an entire new HVAC system including the duct work! The seller at the end of the lease purchase agreement, updated the value to the purchase price to the current day condition and market price! $30,000 more than the buyer had agreed upon in the original contract! “Who is RIGHT?” “GET IT IN WRITING!”

There are several terms of the contract that you will need to pay close attention to. These include:

Leasing to Own: Pros and Cons For Buyers and Sellers

In the majority of leasing to own situations, the bulk of the advantages are on the homeowner’s side. However, there are still some advantages for the renter turning home buyer.

Advantages for the seller:

In a buyer’s real estate market, it can be an excellent opportunity to increase cash flow from renting a property that was otherwise vacant or difficult to sell. Most rent to own arrangements are long-term, and the rental rate can be higher than average, an advantageous arrangement for property owners.

Advantages for the buyer:

Rent to own agreements essentially allow a buyer a few years to work on improving their credit score as well as saving additional funds to go towards a down payment. If a lease option to purchase agreement has the selling price of the house, that price is locked in even if real estate values go up.

Disadvantages for the seller:

You will not be able to sell the house if the real estate market improves, and you are still within the terms of the contract signed. If the agreement includes the sales price, you will not be able to raise the price. If the buyer backs out and doesn’t improve their credit, you’ll be back to the drawing board and be stuck with a vacant rental.

Disadvantages for the buyer:

If you don’t increase your credit score, you could lose the option fee and the years of extra rent paid. Also, it’s possible something out of your control could happen; for instance, a job loss or a severe illness which could prevent you from buying.

As you can see, there are both pros and cons with rent to own for a buyer and seller.

What Can Go Wrong in Rent to Own Arrangements?

Besides the above pros and cons of rent to own agreements, there are other things you should be cautious of both as an owner and a renter. Here are some considerations to think about before entering into one of these agreements:

  • The owner of the house doesn’t pay their mortgage or taxes, putting themselves into the position of being foreclosed on.
  • The renter doesn’t treat the property as well as you do – letting all of the maintenance go, devaluing the property.
  • While living in the property, the renter discovers problems in the house that make them not want to move forward.
  • The owner passes away before the completion of the agreement complicating the transaction.
  • The contract is terminated because rent is consistently paid late and the renters lose their investment.
  • It’s possible a homeowner could try to sabotage the agreement so that they can sell their property for more than the stated contract.

While these are the “worst of the worst” things that can happen, it’s always essential to have them on your radar whether you are the buyer or seller.

Avoid Lease Purchase Agreements

There is a lot of flexibility in rent to own agreements—you and the seller can find terms that you both think are fair. But of all the terms you should avoid, lease-purchase agreements are the most important.

It is not a good idea to lock yourself into a purchase that won’t occur until years down the line. Many things can change, including your financial situation, so steer clear of lease-purchase agreements if at all possible.

Final thoughts

Rent to own transactions are not common, but they can work in some instances when two parties have unique circumstances. Just be sure you go into this arrangement with eyes wide open. Understand the advantages and disadvantages before making a long term financial commitment.

  • April 23, 2020

Nearly 75% of REALTORS® report that their sellers have not lowered listing prices to attract buyers during this time, according to a new survey conducted April 19-20 by the National Association of REALTORS®. This suggests home sellers are avoiding “panic selling” during the COVID-19 pandemic, the survey notes.

“Consumers are mostly abiding by stay-in-shelter directives, and it appears the current decline in buyer and seller activity is only temporary, with a majority ready to hit the market in a couple of months,” says NAR Chief Economist Lawrence Yun. “The housing market faced an inventory shortage before the pandemic. Given that there are even fewer new listings during the pandemic, the home sellers are taking a calm approach and appear unwilling to lower prices to attract buyers during the temporary disruptions to the economy.”

Read more: Sight-Unseen Offers Are Growing

Sales are still happening. A survey released last week from NAR showed a quarter of REALTORS® reporting that their clients had put contracts on homes without physically seeing the property.

More than a quarter of REALTORS®—or 27%—report that they are able to complete nearly all aspects of transactions while respecting social distancing. The most common technology tools that REALTORS® report using to connect with clients during this time are e-signatures, social media, messaging apps, and virtual tours.

Of course, it is!  We haven’t experienced a global pandemic in our lifetime.  We haven’t had an economic shutdown like this before.  Uncertainty is understandable and people tend to fear what they don’t understand. With all that said, it doesn’t mean there are not opportunities for people who can act in this unprecedented environment.

During the recent Great Recession, housing prices experienced dramatic reductions in value due to the subprime mortgage crisis.  Homeownership in the U.S. peaked in 2004 at 69.2% when lenders with questionable practices would approve almost anyone who applied for a mortgage.  

Since the Great Recession, Congress and the mortgage industry enacted significant rules that require a person to actually qualify based on the ability to pay back the loan, cash and savings necessary to close, the house securing the loan and sufficient credit history.

Both first-time buyers and investors were able to capitalize on opportunities during that recession by acquiring properties at below market prices.  These buyers had good credit, the necessary down payment, income and the willingness to act at the moment.  Interestingly, those prices did not stay depressed for long.

Today, there is a big part of America that has good credit, the necessary down payment and sufficient income to qualify but are in a wait and see posture.  It is understandable that both sellers and buyers across the country are uncertain whether now is a good time for them individually to make a move.  

Consumers should understand the difference in the ability to qualify for a home and the ability to afford and maintain it.  If a buyer is secure with their income and job status, a real estate market with less competition can definitely be an opportunity.

Currently, the homeownership rate is estimated at 65.1% based on the U.S. Census Bureau.  This is only slightly lower than its all-time high.

“The housing sector enters this current recession underbuilt rather than overbuilt” states Robert Dietz, chief economist with the National Association of Home Builders, “that means as the economy rebounds … which it will at some stage … housing is set to help lead the way out.”  Ali Wolf, chief economist with Meyers Research, believes housing will be the hero this time “Last time housing led the recession.  This time it’s poised to bring us out.”

The majority of housing economists don’t expect prices to fall because we’re still experiencing a housing shortage.  Both existing homes on the market and new construction cannot meet the high demand from buyers, some who have been trying to buy and have lost bidding wars.

There is probably an equal number of sellers and buyers who are waiting to see what happens to the economy which will reduce the overall sales.  However, for the sellers who are in the market, their prices may stay solid based on the lack of inventory for the buyers who are staying in the market.

All real estate is local and each market, in its various price ranges have their own current characteristics. If you would like to investigate how it might affect your decision to buy or sell, now or in the near future, my staff an I can arrange a video meeting. We can provide you with current inventory levels in your area, the price range, recent sales, up to date current trends looking back for the past three years and current demand levels, and values! Some really interesting data, I’d love to share!

Yikes are you going to be ready? It may be coming after the pandemic ends!

I continue to get asked, whats going to happen after this Pandemic comes to a cooling point! Lot’s of theories, however this Virtual Town Hall Meeting was very informative. Access to the entire video is for members only.

This brief transcript address Realtors concerns as well as buyers and sellers. I wanted you to see the transparency and both sides of the coin!

Here is a brief synopsis of a Town Hall meeting with Inman headlines, https://www.inman.com/ Brad Inman focused on essential solutions for the coronavirus era! Gary Gold and Vija Williams said in the Inman’s Town Hall that once lock down orders end consumers may race back to real estate. “Agents should act now to take full advantage!”

The ongoing coronavirus pandemic may have brought normal real estate to a grinding halt in many places, but a pair of high-profile real estate veterans agreed Thursday that when the crisis abates there’s likely to be a flood of new real estate activity.

“Maybe I’m crazy but coming out of this I think it’s going to be very busy,” Gary Gold, a Beverly Hills agent with Hilton & Hyland, said. “I’ve got to hit the ground running because I think it’s going to be busy, busy, busy for a period of time.”

“I agree that there is going to be a surge,” Vija Williams, director of growth for the Ben Kinney Companies, added. “I think there’s going to be a flood of activity once the shelter in place is lifted.”

Both Gold and Williams spoke Thursday afternoon at Inman’s second ever Town Hall, a digital-only event that addressed ongoing issues in the real estate industry amid the pandemic. During the event, Gold said that business in his area has dipped significantly since the coronavirus has effectively shutdown the economy. However, he is still closing some deals and expects real estate activity to spike in the crisis’ immediate aftermath.

“I also have a feeling that coming out of this there’s going to be a PENT UP demand,” he said.

Williams agreed. She’s based in Kirkland, a community in Washington near Seattle, and said that her area has been “ground zero” during the pandemic. But once her region’s shelter-in-place orders end, Williams believes there will be a “flood” of activity and that agents need to act now in order to take advantage of it.

In Williams’ case, she is telling her agents to think about clients in terms of what they want to do now, what’s happening next, and what comes later. The idea is that even if they aren’t closing numerous deals during the crisis itself, they’re cultivating new opportunities that will pay off down the road.

“Our agents are doing really well with finding that next business,” she said. So I’m saying “please keep me in your thoughts and together we can be prepared to launch your next chapter!”

Gold went on to say that in his case, he’s preparing for the coming surge by creating videos, beefing up his social media presence and getting on the phone. He noted that he doesn’t really have a salesman-type personality, but that just communicating empathetically should lay the groundwork for future deals.

“The more we communicate with people the more opportunity to hep other people and help our clients in the real estate challenges.

Though Williams and Gold both anticipate an activity surge in the near future, all bets are off over the longer term. Gold was generally optimistic, but said simply that he didn’t know what would happen beyond the next few months. Williams, on the other hand, advised real estate professionals to prepare for some potentially longer-term difficulty.

“I do not think we magically come out of this in 60 days and the world is unicorns and rainbows,” Williams added.

Regional differences will also probably play a role in the recovery. Williams said that the economy in her area is based on the technology industry and, thanks to plenty of demand, can probably absorb a flood of new listings without significant disruption or falling prices. But that won’t be the case everywhere and real estate may take a greater hit in other parts of the country where the local economy has been dinged more significantly during the outbreak.

“We’re going to lose buyers in those markets,” she said.

Whatever happens, though, real estate is relatively well positioned, Gold ultimately concluded. He said that prices have been rising so quickly that even if they were to fall now it might only roll back a couple of years’ worth of appreciation — meaning that people who bought their homes five or more years ago will still make money. And, he said, a small price dip could actually even “save us from a bigger correction that’s devastating years from now.”

“It may put a little bit of a damper on something that’s been going on too long to be healthy,” Gold concluded. “Even if prices go down, I don’t think it’s a bad thing.”

Perhaps now more than ever, the prospect of feeling stuck is closing in on us as we’re socially distancing and staying in closed quarters together.

Try some of these suggestions, perhaps print this list out and look at it each morning! My coach and many professionals are suggesting similar lists.

  • Exercise daily
  • Don’t drink calories
  • Don’t sleep too much or too little
  • Never skip meals
  • Don’t allow negativity around you
  • A Journal
  • Pray, if Catholic try the Rosary!
  • Say what you’re grateful for
  • Review written goals daily
  • Laugh daily
  • Personal growth
  • Do a hobby daily
  • Focus on others
  • Protect and limit alone time
  • Don’t work more than 50 hours a week

1. Create a routine

First and foremost, it’s important to develop a daily routine. Map out your main responsibilities to help envision what your day will look like. In addition to outlining each day’s tasks and goals, don’t forget to implement a routine that includes sleeping well. Not getting a good night’s sleep means your body won’t get the critical recovery period it needs to function each day.

Make sure your routine includes time for yourself. Fill that time up with reading books, studying a new language or taking a course online. Take advantage of these next few weeks to improve yourself, especially now that you’re spending more time at home.

2. Meditate

I recommend taking time to set a mindset! “Give thanks, and be grateful, Exercise, Extend a help hand, buy a First Responder Lunch! Meditating allows you to calm your thoughts and give your brain a break. Get your mind to stop thinking of the things you are afraid of, especially in times like now when things are uncertain. Turn on PBS and look up Yoga!

Meditating in the morning allows you to start your day with a clear and calm vision. At night, if racing thoughts keep you from falling asleep or cause you to experience a restless sleep, try simple breathing exercises and meditation to settle the mind and restore your body.

3. Practice visualization

Visualizing your day will help you concentrate and allow you to focus on the good things in your day. It’s a great way to get your mind to focus on positive feelings and thoughts. Visualization also generates energy. Most of us go through the day using a bullish approach, thinking if we work the full eight to 10 hours, we’ll get more done. Instead, productivity goes way down, stress levels go up, and you have very little energy left over for your personal life.

4. Exercise

Exercise is a great way to release “feel-good” neurotransmitters in the brain called endorphins, which act as “natural painkillers and mood elevators,” according to Harvard Health. One way to infuse exercise into the workday is to schedule breaks throughout the day such as walking around the office, stretching at your desk or doing a gentle breathing exercise. If you concentrate on work for

60-90 minutes, followed by a brief period of recovery, you can clear the buildup of stress and rejuvenate yourself to get through a long day.

5. Put down your phone

Another element that can cause a higher level of stress is technology. According to a 2019 study our cortisol levels become elevated when our phones are “in sight or nearby” or even when we hear it or “think” we hear it. Yikes I go through three (3) hours of Virtual Training and a New program comes out that says try this instead!

During this time, we’re conducting every aspect of virtual reality! We’re spending more time glued to our phones — while we eat, sit at our desk, socialize and even as we lie in bed before a night’s sleep. To reduce stress, take a mental break, and put down your phone.

Try taking a tech-free lunch or read funny jokes. schedule a 10-15 minute walk without your phone. When this isn’t possible, try to bring nature in by looking at calming photos, or sit by a window with natural light. Research has shown that looking at Funny Nature in Action! This an similar nature environments has helped people lower heart rates and recover from stressful episodes.,

First time home buyers are often surprised at what happens AFTER they are per-approved for home loan. In fact, especially recently several of my buyers ruin their chances of getting a home by making simple mistakes once they hear the word “approval” from the mortgage lender.

Be honest with your current challenges and do NOT look for a new or different job!

Although it is not the most important item for getting an approval, job history and length of time at your present employer is vital to getting approved for a mortgage loan. A letter from your immediate employer during the COVID-19 is available especially if furloughed.

If you have been at your current job for more than 2 years, wait until the mortgage loan is closed and you have moved in the home before choosing to switch to another company.

Do NOT purchase a NEW or Newer car!

It is so easy to understand the temptation to buy a vehicle after getting a mortgage pre-approval. Especially if you’ve come into some cash or have chosen to cash in on a 401K. Most people are a bit nervous and are filled with excitement when they learn that a mortgage lender has offered them a chance to buy a home. If their credit and income are good enough to buy a house, no doubts, that car salesman will approve you for a new car loan.

The pre-approval issued by the lender was determined by the current level of debt and income during your current position and the individual who applied for the home loan. Getting a new loan for a car “WILL CHANGE” all of that!

It’s extremely wise to hold off on this purchase until you have CLOSED on your new home!

Do NOT MAKE A LATE PAYMENT on ANY existing Debt’s!

You’re pre-approval is determined by a snapshot of your credit at the point you have inquired about a loan. The track record that you have is documented by the credit report used for an approval. Most lenders will request a new credit report for you approximately one or two days before the loan closing. Any late payment that shows up could be a red flag to the lender and delays the closing date to provide clarity for these actions and potentially may result in turning down the loan.

To be clear, make ALL your payments on time while in the loan process while waiting for the mortgage broker to finalize your loan.

AVOID any Unusually large deposits!

Just as your credit report shows a track record of your payments over time, your financial institutions also have a track record. The mortgage underwriter (you’ll despise this individual) no worries, they’re only doing their job. They will review your checking and savings accounts to see if there are any larger or unusual deposit activity in the months leading up to the purchase. Please AVOID any large deposits that do not coincide with your normal banking habits.

What is considered large? Here are some numbers to illustrate the point.

Suppose you get paid bi-weekly and your spouse gets paid weekly. Your spouse has a net check, let’s say usually around $2,100 to $2,300 every other week while your net income fluctuates between $950.00 and $1,125.00 each week. A deposit of $800 would not raise a red flag to the lender. But, a deposit for $3,000 or better would send up a huge red flag because that is much larger than most of your previous deposits.

Do NOT open a NEW BANK Account!

We previously mentioned that you should not switch jobs or add any new debt. This venue is consistency, and this certainly fits within that venue!

Whether you have used your current bank for 6 months or 6 years, it is best to stick with that bank until the loan closes. To open new account creates suspicion among mortgage lenders. They wonder if you are trying to hide funds in one account or if you have unrecorded debt obligations that are going to be facilitated with the new account.

Do NOT SPEND the Funds Earmarked for the Down Payment at closing!

Buying a home can be exciting but also stressful. Getting the utilities switched to a new address, changing address with the post office and creditors and hiring the movers can all take time and some funds. While you may have saved up a nice nest egg to prepare for the home purchase, now is not the time to spend ALL that money!

The estimate provided to you for the closing is just “AN ESTIMATE!”  Things like property taxes, homeowner’s insurance, and other costs can creep up and cost a bit more than anticipated. It is an awful feeling to get a call from your lender notifying you of the closing date and the amount needed for the closing costs are MUCH MORE than your realized and  you don’t have the funds for the purchase.

Do NOT offer MORE for the home over the Appraisal

You may find yourself bidding to purchase a home against other interested buyers. This battle of prices may feel a bit like an auction where the prize goes to the highest bidder. However, mortgage underwriters do not view the home in that manner.

A mortgage is limited by the fair market value of the home which is determined by the appraisal. If you place a contract on a home for a price higher than the appraised amount, “you will be asked to pay the extra from your own funds!”

Be prepared and hopefully your Realtor will explain this challenge prior to making a potential offer of this kind. You may find yourself paying hundreds or maybe thousands of dollars above the market price just to close the deal. This can be a super bad way to start your journey as a homeowner unless you are prepared.

Do NOT Close out ANY DEBT ACCOUNT!

It is usually a good idea to pay down debt and close the account, whether it is a credit card, furniture account or local store account. “However, as we mentioned earlier about keeping your debt as is until the mortgage closes, the same applies here!”

Closing out a credit card, for example, can lower your credit score. One factor of a credit score is the ability to quickly borrow money, also called capacity. If you have a credit card with an available spending limit of $1,000 and only a balance of $100, that means you have the capacity to borrow $900 in the event of an emergency.

However, if you pay off that card and close the account, you then lose the capacity. The capacity reduction can hurt your credit score.

The BOTTOM LINE; leave all accounts open for the time being.

Oh, have mercy, NEVER agree to Co-Sign on a NEW LOAN!

We mentioned earlier that new borrowers should avoid any new debt, especially in the form of buying a new car. This is also true for other new debt such as new credit cards, new furniture accounts or an unsecured loan. This is especially true for being a co-signor on a loan. You may have a close friend or family member that desperately needs your help in this manner. They MUST understand you cannot do so at the current time!

If your mortgage lender told you that you were approved for a home loan, do not co-sign on any loan for a friend or relative until you have moved into your new home. Becoming a co-signer makes you 100% responsible for the new loan, regardless of the good intentions of your friend or relative. This one area is a big no-no for potential home buyers. It will certainly affect your Loan to Value!

Do NOT pass on a HOME INSPECTION

The home appraisal will tell you how much the home is worth based on similar homes in the immediate area. A home inspection will uncover any major problems that need to be addressed before you become the new owner.

If you choose to buy a home without an inspection, against most ANY REALTORS guidance, there is no legal avenue for you to pursue if you discover a problem after you move in.

This means that a faulty water heater, cracks in the foundation, mold in the roof or any other potential problem will be your financial responsibility.

During discovery by the Home Inspector most any elements of concern have provisions in the Purchase and Sales Agreement for negotiating repairs by the sellers! Although most homes are deemed to be  in good shape and there will not be a big problem to deal with. But it is better to be safe than sorry.

Please do NOT ignore Requests from YOUR LENDER!

This can be easy to miss, think of a lender as a person very similar to you, they are merely trying to do their job. In your loan process, their job is to help you buy a home.

Sometimes a mortgage underwriter will ask for very specific things. It is not uncommon for an underwriter to request documentation supporting a sale of a car, major change in job or explanation for one missed payment from 14 months ago. “THEY WILL dissect your past life no doubts!”

If your lender contacts you and asks for some type of document or explanation, be prompt, and thorough in providing the answer. Your entire loan could hinge upon this one item and you don’t want to get rejected because you could not find the time to respond to the lender’s inquiry.

In review of this article, and brief synopsis.  

After you have received your mortgage pre-approval, continue on with your life as if nothing has changed. Keep making payments on time, don’t close out any accounts and don’t add any new debt. Along with the other suggestions above, this should keep you prepared and ready for the final loan closing.