Things Not to Do When Buying a Home

Here are Ten Things a future Home Buyers Should Never Do Before Closing on a Home.  If you do any one of them, it could cause a huge delay in your closing.  Lenders are very tough on borrowers today and they check and double check your credit and work history prior to lending.  They don’t like surprises and you shouldn’t give them any.

The process is well underway for buying your new home. You’ve made the offer and the sellers have accepted it.  Your escrow has been opened. You’re counting the days until you close escrow and get the keys to start to make the house your home. Your lender pre-approved you and sent your application through underwriting, so buying the house is a sure thing, right?

Not quite. Nothing is certain until the keys are in your hand and the deed is recorded. There are still hurdles to get past before it’s yours, and your actions between now and closing can create headaches, slowdowns and even stop the transaction. Yes, stop the transaction cold.

1. Don’t Make a Major Purchase of ANYTHING without talking to your lender first

You’ve just found out your credit is A+. That’s great news, because a new car would look fantastic in the driveway of your new home. But hang on–if you are depending on a mortgage to move in, you’d better wait until after closing to buy that car.

An increase in your debt to income ratio reduces the amount of monthly income available for your mortgage payment.

If you tack on a higher car payment, the bank might decide you can’t afford the home.

Using cash to purchase the car could also create a problem, since banks consider cash reserves when approving your mortgage. If you must make a major purchase before closing, talk to your loan officer before you do it.

2. Don’t Change Jobs Unless It’s Necessary

Lenders like to see a consistent job history. They didn’t used to be nervous if you changed jobs within the same field, but it’s better to stay put until the house is yours. If you do need to change your job, your escrow will slow down while the lender waits to see four (4) pay stubs to make sure your new income will allow you to still purchase that home.  That slow down could effect not only your seller but others if the seller is buying a new home, too.  The seller could ask you for additional funds because of the delay.  Don’t do it unless it’s absolutely necessary.

3. Don’t Give an Earnest Money Deposit Directly to a For-Sale-By-Owner Seller

Your good faith deposit should go into a trust account. Some for sale by owner sellers don’t understand that funds are not their’s to spend until closing. The only place a trust account should sit is with a Title & Escrow Company.  Escrow Companies are neutral third parties to a purchase and they take their instructions from the buyer and the seller.  They are impartial and if you buy that For-Sale-By-Owner home write your deposit check out in an escrow company’s name only.

I’ve heard many stories about sellers who spent the deposit money prior to closing. When the transactions didn’t take place for valid reasons–such as financing or repair issues, the buyers had to fight for a refund.  That can’t happen when the funds sit in an escrow account.

Find an attorney or escrow company who will hold the deposit for you until closing day and make sure your contract dictates what happens to the funds if the transaction doesn’t close.

4. Don’t Let Your Emotions Take Over

Keep a cool head during the entire home buying process, especially during and after a home inspection. Be realistic. No home is perfect, especially older homes. It’s not unusual for new owners to take care of some repairs themselves. Don’t let the seller’s refusal to do a small repair kill the deal on a home you truly love.  Realors are able to negotiate for things you might not be able to do so ask your agent if some things are possible and let them work on it.

On the other hand, don’t fall so much in love with the house that you’ll buy it no matter what needs to be done–unless you’re sure you can handle it emotionally and financially. Decide what type of repairs you can realistically tackle, then stick with the decision.

5. Don’t Forget to Switch Utilities

That sounds simple, but you’d be surprised how many people forget to apply for utility service at their new home. Call the utility companies as soon as you have a contract. Find out how many days lead time they need to switch the service, then get back with them when you have a firm closing date.

Don’t forget to discontinue services at your old home.  That doesn’t mean to shut off utilities it means to make sure the new owner’s have their name on the bill from the day of closing forward.  If they haven’t done this call your Agent to help.

6. Don’t Forget to Line Up Your Fire & Hazard Insurance

A no-brainer, right? But it’s another often-forgotten task that buyers scramble to take care of at the last minute. Before closing, your lender will want to see an insurance binder showing you have coverage for the new home. Get it as early as possible so that closing isn’t delayed.  Your Escrow Officer will need the name of your Insurance Agent for her files, too.

In some locations, additional types of insurance coverage might be necessary such as Flood Insurance. Talk to your lender about insurance requirements well before the closing date.

7. Don’t Become Best Friends with the Seller

I’ll get some flack on this one. It’s great to be friendly, but don’t get into too many long discussions with the sellers, because personality conflicts often cloud judgments.

Remember, this is their home. You’re excited about moving in, and if you didn’t like the house you wouldn’t have offered to buy it. But you’ll make changes–everyone does. A casual statement about “ripping up that ugly carpet” might be hurtful enough to keep the seller from negotiating with you about repairs or other issues that crop up.

8. Don’t Panic if the Appraisal Comes in Low

At least not at first. There are some things you (and your agent) can do to correct the problem. Study your options and talk with your agent about the best things to do. Today it’s very difficult for an Appraiser to do his/her job with prices dropping significantly in some areas.  If your appraisal comes in really low, you can ask for a second appraisal from a second person.  Appraising is not done with computers so everyone doing it does it a little differently.  Lenders are also asking for sales comparisons closer to your purchase date and that isn’t always easy to provide today.

9. Don’t Go It Alone

If you’re working with an agent, it’s the agent’s duty to track many of the day to day details that involve the lender, the seller, or the seller’s agent. Be sure your agent schedules a final walk-through just before closing. At this final walk-through make sure everything is the same as it was when you made your offer.  It is the Seller’s responsibility to keep their home the same all during the escrow period.  If it isn’t, this is the time to find out, not after you own it.

Should you find additional problems during this walk-through, it’s not too late for additional inspections and negotiation with the seller.

10. Don’t Ignore Lender Requirements

Know what is expected of you and take care of it. For instance, a Certificate of Eligibility is required to move forward on a VA loan. That’s something you must handle yourself. Answer your lender questions and make sure that you provide required paperwork as quickly as possible–moving into your new home depends on it.

Your lender will call your employer to verify your employment.  They are likely to do this several times so don’t be surprised.  The lender talks with HR if you work in a large company or with your boss if it’s a small company.  The lenders do this to make sure you are still employed before giving you your loan.  They expect you to be able to pay them back and being employed is a large part of this.

If you follow these 10 things during your escrow period, you’ll get those keys and own your new home without any hiccups.

The good news is that BMR units, that’s Below Market Rate units are included in this program!  This condo property is really beautiful and the condos are done with all of the bells and whistles you’d hope to find in a high-end property.  They’re close to the transit hub in Millbrae for CalTrain or BART commutes.

Here are the Rules.

1.  If you intend to buy a unit you need to download an application for this program here.

2. Be Pre-Approved for a loan before you apply for this program but make sure your lender is aware of this program and has seen the application.

3. Go to 151 El Camino Real in Millbrae and pick your new home.

4.  Sign the contract for the purchase.  If you need a Realtor to represent your interests, and I suggest you have one, call us.

5. You also must bring your application, which has been filled out in full, along with you when you’re ready to buy your new condo.  Make sure you have made a copy of it to give to your lender.

6. Once you’ve been approved by your lender, you must notify Belamor Millbrae Paradise that the loan underwriter has approved you so they can proceed with the paperwork with the City of Millbrae.  The City will deposit $15,000 into your escrow account.  You will not be able to choose the title and escrow company for your purchase so be prepared to work with the company Belamor Millbrae Paradise has selected.

7.  Once you have signed all paperwork at the Title company, and have been notified that you are on record with the County of San Mateo as the home owner you then go to the sales office of Belamor Millbrae Paradise to get your keys and a home warranty.

This really is the first home assistance program I’ve seen in several years.  Don’t expect the offer to last long.  Once the amount of money Millbrae has set aside for it is used up, you’ll be out of luck.

If you need help with this contact us.

I have a question for you today:  Can you buy anything in San Mateo County for $200,000 that is in an area you might want to live in?  The answer is, YES!  Last year I wrote about a client looking to buy something for no more than $350,000 and I took on that challenge, and yes it was a challenge.  We did find some condos that were available and some, not all, but some were inhabitable, too. Almost all of them were bank owned.

This year my challenge is now $200,000 and so far we have found several condos in that price range in communities that offer loads of ammenities for the residents and are in fairly good condition.  I’m talking about San Bruno’s Shelter Creek and Daly City’s Crown Colony.  Both of these complexes are FHA approved, too.  Sure, we are looking at Short Sales or REO’s (Bank Owned) properties but these are 1 bedroom and 1 bathroom condos, not studios.

If you are currently a renter in San Mateo County and are paying $1800 a month for your apartment, why are you doing that?  If you have money in the bank, a good job, and plan on staying in the area for a while you may very well qualify for an FHA loan that allows you to put down 3-1/2%, or about $7000 for a $200,000 condo.  Your payments will be about $1800 and that includes your property taxes, insurance, and home owners association dues.  If you qualify, you may also use the $8000 first time home owner’s tax credit for your closing costs.  Now, there are strings attached to the first time home owners credit, so your lender needs to explain whether you even qualify by income, but if you do, it is free money!

Think of it, you can own your own home for the same money you pay for your rent.  Home ownership offers amazing tax savings bringing down your costs below what your actual payments are and these include tax deduction of the interest on your loan and on your property taxes.

Want more information?  We are only a click away – through the Contact Us button on the left,.  What are you waiting for?

Until last Friday, San Mateo home buyers who were eligible for the tax credit would have to wait until they filed their taxes to collect their money.  With this new plan, lenders are allowed to buy tax credits from first time home buyers and collect the rebate directly from the IRS.  Although first time home buyers must still come up with the entire 3.5% down payment from their own savings in California, they can use the rebate to help pay for closing costs and/or additional down payment money to reduce the loan amount and therefore reduce their monthly payments.

To discuss how you can finance your first home with little money down, please give me a call at (650) 520-0915 or send me an email at Chris@ChrisEWilliamson.com.

Under the current Federal Stimulus Bill signed into law in February, Congress approved an $8,000 first time home buyer dollar for dollar tax credit.  Until recently, this credit was not able to be used to assist with the buyer’s down payment.  However, this week the Federal Housing Administration (FHA) announced a plan that will allow first time home buyers to get a bridge loan and use the $8,000 towards their down payment if they use an FHA insured government loan.

An FHA government insured loan has become more popular in the Bay Area because of its increased loan limits ($729,750 for a single family home) and low 3.5% down payment requirement.  With the $8,000 bridge loan, which would come due when the home buyer received their tax refund next year, first time home buyers are required to put even less money down on a home.  For example, a $400,000 purchase price requires $14,000 (or 3.5%) down payment with an FHA home loan.  If you were to take advantage of the $8,000 bridge loan, you would only have to have a $6,000 down payment to become a home owner in 2009.  This translates to a $62,800 gross annual income with today’s interest rates.

If you, a friend or family member would like to determine if this program is right for you, please contact me and we can examine your financial situation in more detail.  If you want to find Chris, he’s with Mortgage California in San Mateo.

First time buyers shopping for a single family home or condo in the San Mateo-Foster City area have much to choose from today.  We would be happy to talk with you about your wants and needs and help you make them a reality.  Just click the “Contact Us” button on the left and send us your message.

If you are lucky enough to win on an REO bid, be prepared for a roller coaster ride until it’s done, and expect a headache during the process.  Oh, I guess I’m talking about the headaches a Realtor receives, not necessarily what you, the buyer gets, that is, besides a great buy. REO’s are wonderful for First Time Buyers but remember to hang on during the process!

We’re in the middle of one right now.  Our clients are getting a steal of a deal on a 3 bedroom 2 1/2 bath home.  Wow, a great deal and a place that is generally in good shape.  But, here’s what it’s like to be in the middle of one of these deals.  No matter what your contract says, forget it.  It doesn’t really matter because the bank holds all of the cards.

We asked for a 45 day close but by the time all of the documents were signed – a 2 week process – it’s down to 31 days.  We hope the lender will perform, and I have been assured they will, but that’s a headache especially for me.  Banks get snarly in their side of the agreement if you are one minute late in closing.  They charge lots of money, even if it’s their delay.  So be prepared for the roller coaster ride as we crawl up the track.

In a normal sale, the buyer  has more protections in the contact than the seller.  Not so in an REO.  The bank rules.  But, we are not complaining.  We got the bank to pay all closing costs and pay down points, and this is worth a lot of money to a buyer.  In return my buyers will get a fabulous new home under current market value.

But the clock still ticks.  It’s been over two weeks and the escrow has not been opened up.  Reason?  It’s not a local title and escrow company.  It’s  well out of our area and market and doesn’t do business the way it is done in San Mateo County.  That’s another headache and a pause while we crawl the tracks on this roller coaster.

The lender needs a Preliminary Title Report.  I need it too, and so does the buyer.  It’s not been ordered, yet.  The clock ticks.  Headache time. We have contingencies to release.  They are stipulated within the original contract and the number of days we have is there, too.  But that’s not the agreement we’re under right now, so what clock are we on?  Roller coaster here — we’re climbing up, up, up waiting to hit the top of the track so we can release contingencies on time, or better yet sooner.  That way when we’re at the top of the track, the ride down will be smooth and easy for my buyer.

I am confident that we’ll get to the end of the ride  on time, and without too many stops along the way, but it’s sometimes a wild ride getting to the close of escrow. Oh, First Time Buyers,  this is not the usual process in buying a home, which is generally cut and dry.  But roller coasters can be fun and REO roller coasters are well worth the run.

Marina Point has secured parking under the buildings, with elevator access and loads of storage available for each unit.  Sand Harbor offers a storage closet for each unit inside the building but parking is not secure but it covered.

This week there are only 4 Marina Point condos on the market and 2 for sale in Sand Harbor, including one Short Sale. There have been 2 sales within the past month, one in each complex.

Both Marina Point and Sand Harbor are well run condominiums and very well maintained.  If you are looking to buy in Foster City you can’t go wrong with either of these associations.  Remember, if you are a first time buyer, there is a nice tax credit available for you!

If you are thinking about getting off the fence this year, this has to help nudge you!  There are great buys in condos, townhouses and single family homes right in the San Mateo area right now.  Loans are at amazing rates and thanks to FHA financing you can buy a home with as little as 3 1/2% down.  Your credit score can even be in the lower 600′s for this, too. But, you must have good credit, low debt ratios, and a secure job.  No more checking if you’re breathing and getting a loan, but if you are a responsible citizen 2009 could be the year you gain home ownership.

We are here to help you with the entire process of buying a home.  It’s not scary, really.  It’s something most of us dream of and until recently was really hard to do with such crazy prices for our real estate but today, we have seen a correction of about 5% in many parts of the Peninsula.  Some areas in San Mateo County have gone down as much as 50%.  What’s stopping you?  This is free money, folks.

Call us at 650-696-2820 and we will walk you through the whole process.  We have wonderful lenders to pre-approve you for a loan.  Call.