Do’s and Don’ts When Financing a Home

Do’s and Don’ts When Financing a Home

There are some do’s and don’ts when financing a home purchase that you’ll want to abide by to make the process as painless and simple as possible. Buying a home is not complicated if you have a great Realtor, a solid lender and a talented closing agent, but if you do a few unconscious things, it can be like being dragged over broken glass. Let me show you how to avoid that experience.

Don’t – Don’t do anything that will affect your credit report negatively.

Let’s start with the most common and most unconscious mistake home-buyers make. Do's and Don'ts When Financing a HomeDon’t charge anything, buy anything on credit or skip credit payments. That may sound like commonsense, but in the excitement of the moment, some home-buyers will go out and buy new furniture on credit. After all, the local furniture store is having a great sale that will be over before closing, right? Wrong!

Don’t do it. Just say no. Do whatever it takes to keep you from using credit, creating new accounts or expanding your current debt. Lenders will pull your credit when you start the process of buying a home. They will also pull it right before closing. If there are changes, it may, and probably will affect your ability to purchase a home.

Sadly, I just had a wonderful couple who finally found the right home. They could afford it, and it was in a great place. They wrote a solid offer, it was accepted, they were able to get some closing cost help and the seller was willing to do a number of home inspection repairs. Their first home purchase looked like it was finally going to happen. Then they bought a car. Their lender didn’t have the “don’t add debt” chat with them before the sought my help. They never mentioned it to me. I wish they had.

The car purchase torpedoed everything. They were declined their loan. They lost the money they had spent on the home inspection and appraisal and it could have been avoided. I like to say, “Freeze in place.” Financing a home has a very specific criteria that a home-buyer should adhere to, and if they don’t, they will fail like my clients.

Do – Pay your debts.

Pay your debts on time, every time. Pay off as many debts as possible and reasonable. Make sure you keep enough money in your accounts to close on your real estate purchase. This is not the time to play debt roulette. You can’t ignore any bill prior to the financing approval and closing. Stay on course

Don’t – Don’t move money around 

This is a new one for me. I recently had a client who regularly moved money between accounts. If one account had a boost of .25 % interest, the money would be moved there. In the same way, if another one went up .125% in a week, the money was moved there. If the rate dropped on one account, money was moved from that one and invested somewhere else.

In the case, the lender had a hard time keeping up with this buyer’s money. The rotating money wheel nearly caused the buyer to lose the home purchase. The money is there, somewhere, but the constant movement made lenders nervous.

Do – Freeze in place

This is another place where keeping things simple is critical. Don’t move money. Don’t make huge deposits unless you talk to your lender first. The lender will always want to know where the money is coming from. Is it borrowed from someone, or is it a gift? Is it from a closed insurance policy? Where is it coming from? Here again, freeze in place. Keep everything as simple as possible.

There are always things your lender will instruct you to do when you are financing a home. Make sure to listen and follow instructions. You don’t want to add unnecessary stress to your home purchase. Keep it simple.

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There are always things you should never skimp on when doing remodel project. 

There are always things you should never skimp on when remodeling. I’m always fascinated at what people will try to cut corners on, and too often, those cuts are in areas where life and death come into play.

Since I own an electrical contracting company along with my real estate brokerage I have a simple advantage when showing clients a new home. I always make sure the electrical system is safe. I will also send one of my sons, who works for the company, out to the home after closing to test everything and make corrections if we’ve found any problems before or after closing.

Much of the time, I don’t take part in the electrical business directly. I will go out into the electrical field if we’ve contracted a complicated commercial job or we have a job on a really old house. Both types of projects present many challenges. So, they often need more experienced technicians to be involved. For me, it’s a good change of pace.

A few years ago, I had one of those old house projects. Our client has a 1700’s era barn Cooper's Quality Electric Co., LLC - Winchester, VAthat has been converted to a home. It’s really fun to work on it, but it’s really difficult. It has slits in the walls where early settlers would slip their guns through in the event they needed to defend themselves. It has wide plank floors (12″-16″ boards).  It’s actually a brick and stone barn.  That’s really not common in this area.

On this particular project, we were asked to remove some of the previous wiring upgrades that former owners had done, and I was really glad they decided to do that.

Cooper's Quality Electric Co., LLC - Winchester, VAAll of the upgrades we removed looked perfectly fine on the surface.  The average homeowner would never have known that they were all code violations and they were all fire hazards. Most of the items we removed had gotten so hot over time that they had actually charred the devices. I’m sure they were near catching fire more than once.

That brings me to my point.  Whenever you have an electrical need in your home, please do not skimp on the service. That doesn’t mean you need to find the most expensive contractor in your market to do the work, but you need to find the most skillful contractor you can afford to do the work. High price doesn’t necessarily mean quality, but huge discounts by an unqualified technician doesn’t necessary mean you got the best deal either.

I could field a team of electricians who solely make repairs on work done by other so called electricians. I had a call today by a homeowner who was asking for us to send an electrician to fix the work of another “electrician”. Just because someone uses that word to describe their work, does not mean they are actually an electrician. State databases can confirm or deny whether someone passing himself off as an electrician is really an electrician. It’s critical to check that database because it is the difference between experience, education and licensure. If there is no license, there is also no insurance.

I’m always amazed when someone tells me their brother-in-law, or a friend, or somebody they found on Craigslist did their wiring. “Oh, is he an electrician?” “No, but he knows a lot of stuff.” That kind of response scares me. This barn was a great example of someone trying to get by on the cheap and it nearly cost the owner his home.

Ask around. Find competent professionals. Ask for references. Call the references and take this area of a remodel as seriously as you can, because a jack-leg electrician can cost you more than a few bucks. This is no place to hire the weekend warrior with a Stanley Wiring Made Easy book and a tool-belt.

 

 

One great idea can change your life.

Did you know that one great idea can change your life, and the lives of others? It absolutely can. When I left high school, I wasn’t interested in college, and quite frankly, I wasn’t mature enough to be trusted with a $40,000 investment that might not produce a dollar. I can only imagine it would be have been a four year party with a long financial hangover.

Because of that, I entered the workforce as a clueless teenager. I went into amanufacturing job where I had no idea what I doing, but I maintained industrial equipment. While I worked there, I learned a lot and one day I received a phone call on the floor emergency line. I went to pick up the phone fearing the worst. Much to my amazement, it was a major US corporation calling me at my place of employment on the emergency line to offer me a job, sight unseen. I was 19. How did they even know I existed?

I took that job, and for the next five years, I loved my job. One of the greatest things about that job was that the company (and you would know them if I mentioned their name) allowed me to modify their equipment, redesign parts of their manufacturing process and create new machinery. I changed the way they did parts of their process. I designed equipment that was manufactured and put into service worldwide. One creation of mine improved their output from 100,000 to 1,000,000 units without changing their expense one cent.

I was still under 24. I had no education, no mechanical engineering degree and no idea of what I was doing. But, I could see flaws in their process and I corrected it while the engineers sat in offices trying to figure out how to make things better. The company sent a group of engineers in from their corporate headquarters to find out why my equipment was producing more products than they had calculated it was possible to create.

I felt like a rockstar. For fun, I wore a pair of Mickey Mouse ears and Mickey white gloves while they were there, and I acted like that was the norm. I was just messing with them, and they thought I was crazy, but what I was – was amused that the pros couldn’t accomplish the same thing from behind a desk. I realized that great ideas are not only within certain communities.

I finally left that job and went back to college. Four master’s degrees and mid-way through a second (and last) doctorate later, I still relish the experience at that manufacturer. I could walk back in there today and open my toolbox and do that job again. It is that ingrained in my pyschi. Why? Because I realized at that job that great ideas are not isolated within a small group of well-educated and brilliant people. No, brilliant ideas are born everyday within average people, and those ideas have consequences. Not only do they have consequences, but they change lives.

Some of the electronics you touch everyday started in a garage by a college dropout. There are far too many stories like that to deny the impact of a great idea. Within every individual is a seed of greatness. The challenge most people face is overcoming a life of training that tells them “You’re average, and average people do average things and have average lives full of average events.” If you choose, that can be true.

If you are wishing you could come up with something that could set you free financially, let me tell you this, you can. The biggest impediment to most great ideas is past training and fear that your ideas won’t be accepted. So what? So what if  they aren’t accepted. Anytime norms are challenged, there will be push-back, but when you know in your heart that your idea is a great one, you have to dig in your heels and push forward. Ignore the skeptics and naysayers.

But, I don’t have any education! Now, here’s the thing about education. Even with my 30 years of obtaining college degrees, the things that have caused me to be in the top 10% of my real estate market, and that has caused my contracting company to turn down 30 large commerical projects a month have nothing to do with college credits. No, it has everything to do with great ideas. I’ve done the college work to keep my brain exercising so that it’s always thinking, which opens the door to thinking about the next best thing. I taught a college class last week where I challenged the students to strive to allow their minds to dream of bigger, greater, bolder and more audacious ideas.

One great idea can change your life and the lives of many others. Don’t think you can’t do it, because if that becomes your norm, it’s likely to become your reality. But, if you realize that you have the ability to do something that is mind-blowing, even if it is small, do it. Some of my ideas at that manufacturer were very small, but they created great results. Your brain is in your head to be more than a tenant. It’s an inventor, an entrepreneur, a game-changer, a life changer, a magician. Use it and leave a legacy of greatness in your path.

This post was originally posted at Activerain.com: One Great Idea Can Change Your Life.

Do the important things first and your home will sell quickly. If you don’t, it may sit and become stigmatized.

Do the important things first and your home will sell quickly. If you don’t, it may sit and become stigmatized.

Do the important things first and your home will sell quickly. If you decide to gamble with the listing, hoping to attract a clueless buyer, you may end up with a house that is stigmatized and invisible. One of the things I do when I take a listing is inspect the property from top to bottom. As a broker and a contractor, I have a good eye for things that keep properties on the market too long.

I’ve been through enough home inspections to know what catches an inspector’s eye and what doesn’t. Beyond that, I’ve sold enough homes to know what catches a buyer’s eye and what doesn’t. If a seller lets regular maintenance go too long, it will show up in the showings and a home inspection. Buyers do not like to buy other people’s problems. If they are willing to make an offer on a property that has issues, there is a pretty good chance the offer will be low.

Your home will sell quickly if you do some simple things.

I’ve never had a listing linger where the sellers followed sound advice, but I’ve had Do the important stuff first and your home will sell quickly. If you don't, it may sit and become stigmatized.some linger endlessly when sellers took a wait and see approach to listing the home. That basically translates to “maybe the buyers won’t notice or won’t care” about certain issues. They will notice and they will care.

This year, I had one house get two showing requests in the first 10 minutes of listing it, and one of those buyers bought it for full price. Why wouldn’t he? The sellers had the house ready. It was an older home, but they put some wonderful personal touches on it to enhance its charm, and they fixed everything, painted what needed to be painted and they took away every objection a buyer would have.

In another case, the seller wanted to wait and see if someone would throw an offer at a house that was dated, was plain vanilla with a tutti-frutti price and was missing appliances. The home received a few low-ball offers over the first few months I had it listed, but the seller was sure someone would come along and buy it in spite of those issues. They didn’t.

Throughout the year, I tried to get the seller to make some changes, but he refused. At the end of the listing period, I refused to re-list and the seller found another agent. He ultimately lost a lot of money off of the first list price and the first offers. If he had done the important things first, and that can be simple things like, paint, replace carpet, make sure everything is working and serviced. He would have likely sold quickly and for a better price. He ultimately lost a lot of money playing the naive-buyer lottery.

Do an assessment of your home to help your home sell quickly.

Do the important stuff first and your home will sell quickly. If you don't, it may sit and become stigmatized.Do the important stuff first. Make sure everything is in working order. That will mean all appliances and systems are working, paint if needed, change or clean the carpets, make sure all light fixtures have working bulbs in them, make sure everything is clean and the house is move-in ready and your house will sell quickly. If you don’t, a potential buyer will walk through your home with an invisible calculator running to decide how much he/she will be taking off the price with an offer.

Your home is only worth what the market will bring. If you see a steady flow of low-ball offers, your home probably wasn’t ready to be on the market. Do the important stuff first and your home will sell quickly. Trust me on this one, I’ve seen it work too many times to take a chance that someone will still make a good offer on a home that isn’t ready for the market.