Monthly Archives: March 2012

Preparing to Buy? Here’s what to Do

Yes. It is a great time to buy. Interest rates and prices are at all-time lows while inventory is at record highs. But what if you can’t buy right now or if you timetable is not right now, but in a few months.  What can you do to prepare to buy?

Lenders are looking for 5 things to qualify you for a mortgage. Assets (money to close and out out down). Credit score 620 to 640 and up. Income. Low or no debt. And job stability. Lenders will look all factors. All five don’t have to be stellar to make it a go, but if at least three are no good, that is likely a no. But some of these things can turn around fast with a little knowledge and determination.

Credit. The score is a minimum standard for lenders. The better the score, the easier it is on other factors. Get your score online form a reputable company. Make sure you are not signing on to any kind of long term reporting.

Look at your report and identify anything that is not yours. Pay off debt and collections. Too many opens and too much are the problems. Recent collections hurt most. Get new credit lines to make a positive impact. See my credit blog to get more in detail about the steps to improve credit.

Too much credit can also hurt. It is a fine balance. Fico scores also reflect how much revolving credit you have. Reduce the amount of credit cards keeping one or two major bank cards and maybe a store or two.

Debt. Debt and credit often go hand in hand. But debt also has a direct effect on your home buying power. Too much debt each month will reduce the amount you can pay in monthly mortgage.

Lenders are looking for 42 to 45 percent of your gross income to be spent on Mortgage and any contracted monthly obligations like car and student loans, minimum payment credit card debt, etc. (do not count utilities in that). So, the lower your debt, the more house you can get or the less work you will do to fix it up.

Income and job stability are also issues that go hand in hand. You have to have income. Jobs are six month minimum on the job in most cases. Some lenders like as much as two years on the job. All lenders have different rules and there are exceptions. Gaps in work (-unemployment) are the hardest to overcome, but you can definitely ask.

Your w2 income and adjusted gross income as stated on taxes are considered in qualification. So if you take a lot of deductions or if you are self employed, the income on your tax returns minus deductions is what will count as your income, not what you say you make.

Last but not least money and assets. Bank statements and 401k, stock, etc. tanglible assets are considered by banks to cover down payment and closing costs. You want to show the money on paper (in the bank) for at least two months. Cash on hand is not considered. You need a paper trail.

So you need to make a plan – month by month. How you can save money and apply it to pay off debt first.

There are a lot of homes available right now.  Once you have your financial house in order, you need to see what you want in a real house.  Try to come up with a wish list of what you want out of a neighborhood, schools, transportation access, etc.  And what you both want and need out of a house.  What you don’t like.  And despite what you can spend, what you are comfortable spending.  And know how much or how little work you are comfortable doing.  The best home for you may need a little work.  Distressed properties today often need a little fix up, but you need to decide what you want.  A little up front homework and discussion will help you get your game plan so when you speak to a Realtor to help you, you can have a pretty good direction.  Especially if there is more than one person making the decisions.  Get on the same page as much as you can.  It will save you a lot of time and grief once you are looking if you know what you want.  Looking at homes can sometimes be overwhelming.  This way you can focus a bit.  It is ok to change your mind, but it helps to have a foundation for a start.

Even if you need a few months to get things in order, you should start looking for a good Realtor to represent you.  It doesn’t cost you anything and will save you money and headaches when they will help you with everything from getting a good lender and inspector to finding and contracting a home.  They will also protect your interests to ensure you don’t overpay for a home and get the best deal and are not taken advantage of.  The real estate market now is tricky, but a good Realtor can be your guide and successfully help you navigate the waters.  They will also answer all your questions and educate you on the process every step of the way.  This is what you should be looking for in a Realtor, knowledge, expertise, communication and willingness to help you every step.

RE Marketing Consultants is a licensed Illinois real estate brokerage specializing in helping and guiding buyers, sellers and investors through today’s real estate market to achieve their dreams and goals of home ownership and investment benefits.


Purchase and Rental Scams – Buyer Beware

The Internet is a vast and wonderful thing but can also be a breeding ground for corruption and crime.  Case in Point – Internet Real Estate Scams are rampant taking advantage of the current market and economy.

Rental Scams:
I recently had a potential renter call me about one of my rental listings.  She found me on Trulia after reading the same post on another consumer internet source for a much lower amount.

It turns out someone copied my listing from a listing source and put it on a open consumer site and pretended to be the owner who lives out of town and tried to solicit money from potential renters.  A scam.

Another client told me (before I started to help them) they were charged money for credit checks or applications to rent and didn’t get the place.  That one is harder because most landlords do credit and background checks and charge for them.  Some can be real.  What I usually recommend is make sure you are in the running before you give them anything and ask that they agree to you first and pending credit check.  This one can be tricky – may be legitimate and maybe not.

Another client recently told me that they were dealing with a landlord who would sell them the home – rent to own.  Rent to Own can be very legitimate, but I encourage you have the downpayment or anything more than a security deposit held with a legimiate escrow source like a Realtor, title company, attorney, etc.  to protect your interests.

Foreclosure Scams:
Another client recently asked me about a home that was listing at a very small price – much less than half of real value.  It was a company that said they give out foreclosure lists, but you have to give them your credit card information and pay for the list.  I looked up this company online and
found many consumer complaints about charging the credit card and selling information.

I have heard of these scams before and decided to share some of what I have found.

1.  Most of the time, if it sounds too good to be true – it is.  Always be on your guard.

2.  If they ask you to pay for a listing or your credit card or to send money without meeting someone or seeing the property, it is probably suspect.  Real landlords are not going to rent to someone without getting proper background checks, etc.  And someone really selling a home legitimately is not going to ask you to pay to find out about it.

3. Anyone can launch a website.  Google the name of the company and see what comes up.  If there are complaints – ask more questions and research more.

4. Use a Realtor.  Realtors can help you with rental properties and help you with purchases.  And Realtors only deal with legitimate properties on the MLS for a reason – we know they are legitimate.  There is no cost for you and you can ensure that things are done the right way.  How do you know that the person is the owner, etc.  Sometimes Realtors will deal with owners, but they will ensure you as their buyer is protected as much as possible.

5.  If you insist on dealing with an owner on your own – get an attorney involved and ensure this person has the deed and the right to sell or rent the property.

A home is a big deal whether you are renting or owning and you don’t want to be cheated or victimized by scams.  Do yourself a favor and consult experts to help you.  And do your homework.  They are legitimate deals in the market now, but there are also a lot of scams.  Be careful and remember to ask questions.