Things NOT to Do Before Buying a Home

 
These are "MUST DO NOT" things before buying (or even looking) for a home.

 

No Major Purchase of Any Kind:

 

When you get a raise or accumulate some savings, you may find yourself confronted by an innate instinct of modern civilized men and women.  It begins simply, by going out to restaurants, then accelerates to buying clothing, electronic gadgets, and since most Americans have a special fondness for the automobile, you may even buy a "brand new car."

 

If you're married or ambitious, a few months later your thoughts eventually turn toward buying your own home, or a move-up home, if you are already a homeowner.  Next, you contact a loan officer to get prequalified for a mortgage loan. You state your desired price and how much you can put down. You provide your income and may even supply pay stubs and W2 forms. The loan officer methodically crunches the numbers (by telephone, in person, or even over the internet).  "If only you didn't have this car payment…"

 

Don’t Move Money Around:

 

When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs.  Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets.  This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

 

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.  The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits.  You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

 

Perhaps you become exasperated at your lender, but they are only doing their job correctly.  To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds.  Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

 

So leave your money where it is until you talk to a loan officer.  Oh…don’t change banks, either.

 

Should You Change Jobs?:

 

For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money.  For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

 
Think ahead.  If you're even beginning to think about a new (or move up) home this year, talk to a real estate broker first.  They can properly advise you as to how ANY purchase now, could affect your ability to get that new home you want, later.

 

 

Worst of Housing Bust is Over

 

The worst of the housing bust is over, economists said by nearly 2-to-1 in the latest WSJ.com economic forecasting survey. But they still predict that the average selling price of a house will fall next year.

 

After several years of double-digit percentage increase, housing prices stopped soaring this year. The 49 economists responding to the WSJ.com forecasting survey expect home prices, measured by the government's Office of Federal Housing Enterprise Oversight index, to rise 2.8% this year and to fall by 0.5% next year. That contrasts with a 13.4% increase in 2005.

 

"We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. Prices still have some ways to fall before they'll stabilize, but there are signs that most drastic parts of the downturn - marked by a sharp pullback in demand and new construction - have run their course.

 

The economists' predictions for home prices next year vary widely, from an increase of 7%, predicted by Kurt Karl and Arun Raha of Swiss Re, to a 10% decline, expected by Maury Harris of UBS. Mr. Harris, for his part, said he expects a large inventory of vacant newly constructed homes to push prices lower in the first half. Construction companies "built much more than were justified because of investor interest," he said.

 

Read the full story here…

 

 

Home Prices: Record Drop in October

 

According to an industry group, the price of existing homes sold in October fell for the third straight month and posted the biggest drop on record adding it expects weakness in pricing to drag on into next year.

 

The National Association of Realtors said that the median price of a home sold in October was $221,000, the same as in September, but down 3.5 percent from October 2005.

 

The previous record drop was a 2.1 percent decline in November 1990, the real estate group said.

 

While month-to-month declines in home prices are not uncommon, year-to-year drops had been rare before the recent housing slump.

 

August was the first month in 11 years to see such a decline. September was originally reported as a record 2.2 percent drop, but a revision in those numbers put that price decline at 1.8 percent

 

Get the full story here…

 

 

Moving Tips

 

One Month Before Moving

Obtain an IRS Change of Address form, call 1-800-829-1040 and ask for Form 3903 to help deduct Moving Expenses.

Gather moving supplies, boxes, tape, rope.
 
If moving far away, make any necessary travel arrangements like airline, hotel, and  rental car reservations. Or plan your travel route if driving.
 
Call a moving company or make truck rental reservations to move yourself.
 
Finalize real estate and apartment rental needs.
 
Place legal, medical, and insurance records in a safe and accessible place.
 
Obtain a Change of Address form to tell the Post Office of your move.
 
Give your mailers your new address:
          

• Friends and family members
• Banks, insurance companies, and other financial institutions
• Charge card and credit card companies
• Doctors, dentists, and other service providers
• State and Federal Tax authorities and and other government agencies as needed.
• IRS–see note at the top of this post.

You can do this by sending them Address Change Notification Cards or, for magazine publishers and business mailers, by following their change-of-address instructions.
 

Save moving receipts (many moving expenses are tax deductible).
 
Make maps of your new neighborhood to familiarize yourself and your family with your new area.
 
Plan your moving budget

 

Two Weeks Before Moving

Inform gas, electric, water, cable, local telephone and trash removal services of your move. Sign up for services at your new address.
 
Line up new cable service for your new home.
 
Inform long distance phone company of your move. Sign up for long distance service at your new address.
 
Recruit moving-day help.
 
Confirm travel reservation.
 
Arrange to close or transfer your bank account, if appropriate.

 

The Day Before Moving

Set aside moving materials like a tape measure, pocket knife, packing boxes, tape and markers.
 
Pick up rental truck.
 
Check oil and gas in your car.
 
If traveling, make sure you have tickets, charge cards, and other essentials.

 

 

10 Things Your Lender Won't Tell You - Part 5

 

Today, a look at the final three "Things Your Lender Won't Tell You."
8. "You Should Worry About Our Finances Too."

 

The chances that your bank will go under are slim, but it does happen. Shanda and Steve Falcon know all too well. It took Abbey Financial, a lender in Cambridge, Mass., six months to refinance the Falcons' mortgage. Four days later, the deal fell apart and Abbey declared bankruptcy. The Falcons were out no small amount of money, including $1,700 they paid for a rate lock. And they weren't the only ones. Abbey's bankruptcy stranded 867 other homeowners in six states.

 

Think it couldn't happen to you? Think again. Things have calmed down since interest rates have fallen from the highs of 1994. But Mark Thomson, a department of financial institutions assistant director in Washington State, warns that "rates could get bumped back up at any time, and the same situation would replay — if the market dries up, firms that aren't financially stable are going to have a difficult time." The upshot: If your mortgage banker or broker shuts down, your file may land on a trash heap and you'll have to start your loan-hunting-and-gathering expedition all over.
 
9. "You're 'Prequalified'? Don't Bank on It."

 

Lenders will tell you that prequalified borrowers practically have their mortgage in the bag. But they often don't mean it. Sometimes they will pre-approve you based on what you have written or verbally stated with no verification. These are called "wastebasket" approvals. When it comes to actually getting a mortgage, they don't mean anything. That final approval is dependent on verification of that information. This can mean trouble all around. Once a client of Ray Rizio, a real estate attorney in Bridgeport, Conn., went into contract with a buyer who had been pre-approved by a local lender. "Three other deals went into contract based on this pre-approved buyer — it was a sure thing," he says. It wasn't. The buyer wasn't a U.S. citizen, he had five different employers, and he had horrible credit. "The lender didn't even pull his credit report," says Rizio.

 

Happily, lenders are adopting tougher pre-approval rules. But get it in writing before you make any plans based on a lender's word.
 
10. "What Happened to Your Prepayments? Can't Be Sure."

 

Many homeowners pay down their principal early, bit by bit. It's a great way to reduce your interest payments over time. But often those extra payments will sit in an escrow account — and won't be credited toward your principal — because your lender doesn't know what to do with them.

 

In 1993 Kathleen and Hal Aaron paid an extra $1,017 on their $117,000 one-year adjustable-rate mortgage for their New York City pied-a-terre. But when they got their year-end mortgage statement, there was no record of that payment. Where was the money? The Aaron's lender had stashed it in a savings account. Only after two months of phone calls and irritation was the bank able to find the cash and put it where it belonged.

 

Why aren't lenders on the ball? It confuses payment schedules, for one thing. But lenders also make money on the interest you pay — income that's eliminated when you prepay your principal.
We hope you gained some useful insight in to the world of mortgages with this series.