By MC Dwyer and Ronnie Trubek
Buyer Dos & Don’ts
Don’t wait until you have a 20% downpayment to buy. A 20% down payment is the golden number when applying for a conventional loan, since you’ll avoid paying private mortgage insurance (PMI). But with today’s low mortgage rates, waiting for that magic 20% could be a huge mistake: The more time passes, the higher mortgage rates and home prices may go! There are many loan programs available, including several zero and low down payment options (just 3-3.5%), Investigate what loans might work for you.
Do get full loan pre-approval before house shopping. Mortgage pre-qualification and mortgage pre-approval sound alike, but pre-qualification is just a basic overview of a borrower’s finances where the lender considers stated income, assets, debts, and credit—but no supporting paperwork. You’ll get an estimate of the loan amount you can afford, but little assurance that you’ll actually get the loan.
Mortgage pre-approval is an in-depth process that involves a credit check and an actual verification of your finances. A pre-approval letter is a written commitment for financing up to a certain loan amount, pending only a few additional items.
Getting pre-approved in advance may allow you to clean up credit issues and qualify for a lower interest rate or save you the heartache of falling in love with a house you can’t afford. Pre approval will make your offer more attractive and allows you to focus on your offer strategy and not be scrambling to submit loan paperwork.
Bottom line? If you’re serious about buying a house, you need to be pre-approved
Don’t make any big changes during the home buying process! Changing your job may undermine getting a loan. Mortgage lenders like to see at least two years of consistent income history when pre-approving a loan, and changing jobs while you’re under contract to purchase can create a big issue.
Your best bet? Wait until after you’ve closed on your house to change jobs.
Opening new bank accounts, credit cards, lines of credit, even credit inquires will have an impact on your credit score and can ding your score by up to five points! This could change your loan terms or even get you denied altogether. Lenders will obtain a last minute credit report and an employment verification to confirm everything they have documented is the same.
Do stay in town and be available during the entire process. Timing is everything…making an offer to purchase the week before you leave on vacation is not a sound idea. You will have a limited contingency period to review disclosures, obtain professional inspections, and investigate the property. Attend the inspections so you fully understand the property and any potential flaws. Put in the time and effort to get proper bids for repairs so you don’t have surprises later.
Don’t overlook hidden gems. Just because a house has been on the market a while doesn’t mean something is wrong with it. Stale listings from un-co-operative tenants, family circumstances, legal issues and just being an ugly duckling may offer overlooked potential. Sometimes, the seller just missed the correct list price in the beginning and will now consider a lower offer.
Being clever or handy, having vision, or being able to afford some repairs may allow you to open more doors than a buyer who only wants move-in-ready homes.
Do know today’s market. Neighborhoods, ask-vs-sell prices, buyer /seller psychology, winning strategies. Stay on top of social media and online advertising where a home might pop up for sale before it’s officially on the Realtor’s Multiple Listing Service. Shop for homes that are listed at prices 10-15% less than what you can afford so you have negotiating room if there are multiple offers.
To be a successful buyer in today’s challenging market, figure out what YOU have to offer the seller. What will make your offer rise to the top of the stack? Usually it’s price, but not always…we’ve seen buyers offer quick closes, free rent-backs, a free vacation resort week, even chicken-sitting until the sellers are settled in their new home!
Real Estate Facts
January Median Prices – California $527,800 | Santa Cruz Co, $710,000 | San Lorenzo Valley, $569,000
Mortgage Rates – Week ending 3/2/18: 30-Year Fixed, 4.57% | 15-Year Fixed, 4%
Ronnie Trubek (DRE #00782879) and MC Dwyer (DRE#01468388) can be reached at: C21ShowcaseREgals@gmail.com