Buyers - What to Do and What Not to Do

Home shopping is actually quite fun when buyers are informed and able to move through the process with their eyes wide open. Honestly it starts with the basics. Just like in elementary school people are always looking for short cuts, ways to get to the good stuff without the need for taking care of the details first. Unfortunately most of us learned the hard way that in the end this only makes it more difficult. Remember long division? I do. In fact I also remember teaching to my daughter. Laurie is one of those people who is able to do math in her head without the need for scratch paper. Lucky her! She was able to look at a problem and simply tell you the answer. The part she struggled at was showing her work. Whether for lack of ability or for simply not wanting to take the time, she didn't do it. This became a point of contention for her when she entered public school as her teacher consistently marked her down and lowered her grade on papers and tests for not showing her work. Laurie believed the steps did not matter as long as the outcome was correct. And this very well may be true, except for the fact that the directions said to 'Show you work'. Thus making it a gradable step. For those of us who need to do the steps in order to get the answer we learned it is very important to follow the instructions and do them in the proper order to gain the desired outcome, a correct answer.


What To Do:

In order to have the joy of finding just the right home to purchase one must first follow the steps to obtaining approval to make that purchase. Also known as mortgage approval or being 'Pre Approved'. Getting pre approved is fairly easy and actually painless. I have a list that I give our clients at a buyers appointment which lays out the items the lender will need to see in order to process your request for approval. They include:

Income:

• Paycheck Stubs (last 30 days)
• W-2 forms for the past two years
• If self-employed, previous two years tax returns
• Other income information if applicable: child support, retirement, social security, etc.
• Start date of current employment (must cover 24 months history)

Assets:

• Bank Statements (last two months, include all pages for both business and personal)
• Two months statements of liquid assets (investment portfolio: stocks, money market, 401K, SEP, etc.)

Other Information:

• Residence History (last two years including dates)
• Landlord History (address and phone for last two years)
• Date of birth (all borrowers)

Once you have your loan pre approval you can begin your search for homes that fit the mortgage and payment amount that you are comfortable with. Why look at homes before you know what you can afford to buy? It can be very disappointing to be looking at homes priced in the $200,000 to $250,000 only to find out that you qualify for $175,000 and will more than likely be purchasing a town home or condo rather than a residential home. It can be equally discouraging to be looking under budget depending on the neighborhood you desire to love in. Best to get approved first and then start searching!

It is also a good idea to maintain open communication with your Realtor and your Loan Officer. Tell them everything! What you like, don't like, what you know and what you don't know. If you have a question, ask it! The only stupid question is the one you didn't ask. Your Realtor and your Loan Officer want to help you be informed throughout the entire home buying process.

While searching for homes many buyers catch the bug! The shopping bug that is. As they began to realize that their new home will need a few more things than they currently have such as new curtains or perhaps new blinds, maybe a new washer and dryer or refrigerator, they began to start looking online and at local stores in their free time. While it never hurts to look and is a great idea to start gathering information and pricing so as to plan for your new home it is best to stay clear of making any purchases while home shopping. Every time you access your credit file to apply for a credit card, loan, or make what may seem as insignificant changes to your credit card balances your FICO score changes. If you make a purchase on a department store card such as Sears it can greatly effect your FICO score and it may actually change your ability to get a loan or at minimum change the interest rate that you qualify for. Some buyers are surprised shortly before closing when they are informed they no longer qualify for their mortgage due to changes in the credit report.

What NOT to do:

• Make purchases on your credit cards
• Apply for new credit cards or lines of credit
• Apply for an Auto loan
• Make larger than normal payments to your current credit cards or lines of credit (pay off entire balances, yes even paying things off can have a negative affect). If in question ask your loan officer before making a payment.
• Absolutely do NOT change your job!
  

Many buyers think once they are past the approval process, have made an offer on their new home, have made it through the inspection and appraisal process, that they are home free until closing. Hopefully, this is the case. Lending guidelines have changed drastically over the past 2 years. One step that has been added much to many people's surprise when uninformed is a day before or day of closing phone call to verify employment. The underwriter or processor makes the call. If they are told you no longer work for the company you specified on your application your loan cannot be funded. Imagine your surprise (and your agent's) when you are called the day of closing and told you are not purchasing a home today. If you are in the process of changing jobs wait to purchase a home after the change as long as it is in the same industry you currently work in and for the same or higher pay. If you will be changing job profession entirely you may need 1-2 years on the new job before obtaining a loan. If that is the case you may want to hold off on your job change until after you have closed on your new home if at all possible.

Many underwriters also run a last minute credit report to see if there are any changes there as well. Throughout the final days before closing many buyers are asked for additional documentation to verify down payment funds, sources, employment, rental or investment information. This is different for every buyer. Be prepared to provide whatever is requested as quickly as possible in order to help your loan process flow as smoothly as possible. The quicker they have the information the sooner conditions can be met and your loan documents can be delivered to escrow for signing.

I have to admit that I "borrowed" this blog post from Kristi Lyn Reddy of Reddy Family Real Estate in Seattle - but it was really great information.