Tips

How Paperless Banking Can Get in Your Way

My clients had finally found THE HOUSE, and we’d just finished writing up an offer to purchase. When I explained to them how the earnest money check was to be made out, they took on that deer in headlights look and told me, “But, we don’t have checks.” Ah, yes, paperless banking. And since it was past 5, we spent the next fifteen minutes strategizing how they could come up with the $1000 so that could be converted into a money order. I got to thinking about it and realized that paperless banking could really be a PITA for people wanting to buy a home.

Here’s a few situations that come quickly to mind, and why you just might want to have a checkbook available to help you accomplish your real estate and financial goals.

#1 Earnest Money Deposit– when you write an offer to purchase, the buyer is required to tender a good faith deposit. Yes, it’s true that you can use a money order. However, if you’re taking out a mortgage, the mortgage company will want a copy of the front and back of the cancelled check. If you can’t produce one then the amount of cash in the bank needing to be verified by your mortgage company will be affected- and that could leave you in a Catch 22 situation.

#2 If you’re doing contract financing, when you get ready to close, you’ll want the cash to close to come directly out of your bank account. It will likely help you to satisfy lender requirements down the road when you get ready to refinance. If you don’t have a bank account, it may be a real challenge to prove that those funds were “your money.” If you have nothing but a cash card, you may not be able to create a satisfactory paper trail and your mortgage company will require you to come up with the down payment all over again. Ouch!

#3 If you’re currently renting and are thinking about buying a house in the near future, you may want to pay with a check. You see, when you get ready to buy, your mortgage company will be obligated to verify your rental payment history for the past twelve months. (In fact, depending on circumstances, they may not be able to approve your loan without this crucial piece of information.) Now, if you pay your rent to an individual, your mortgage lender will require copies of cancelled checks for the past twelve months. (Paid receipts won’t work, and neither will money order receipts.) If you pay a poperty manangement company, your mortgage lender will accept a form from the property management company. That usually makes it fairly easy— that is, unless they refuse to cooperate or fill out the form in such a way that it puts you in a bad position. In that case, you would be relieved to be able to produce cancelled checks.

#4 If you’re buying on contract and are thinking about refinancing anytime in the future, then Paragraph #3 above applies to you as well.

Paperless banking may otherwise fit your life style to a T, however you just may want to have a set of checks set aside just for your real estate and financing needs.

ing cloWhen you get ready to closee if they are to count that money in

So you wanna’ see a couple houses, do ya?

Some people see a sign in a yard and want to see that house immediately- like right now! For others, well, they have to work up some nerve before scheduling an appointment to actually walk through a house that’s caught their eye. Regardless of when the time is right for you, here’s a couple thoughts that will enhance your experience…

#1 Do your best to email, text or call a day or two in advance of when you might actually like to see a house or group of houses. There’s a couple reasons for that— the sellers may need notice to crate a dog. Or someone else may have already scheduled a showing for that time slot. And my schedule (while flexible) does fill up.

#2 If possible, be a little bit flexible about what day or time you could schedule an appointment. Have a couple options in mind. (See #1)

#3 Btw, scheduling to see several properties, one right after the other, is a far more efficient use of your time. It’s also a better way to measure one house versus another, and to gain a feel about what works for you and what doesn’t. What’s the best number? I think most of my clients would probably say 5 is about right. Any more than that and they all start running together in your mind. And if you look at 5, there will be a couple that you’ll just not like and will rule out immediately, a couple that’ll be ok but just not “IT” and hopefully one that floats your boat!

#4 When scheduling appointments, it really helps a lot if we communicate back and forth swiftly. Otherwise, openings will close up and you’ll be back to square one.

(Now, for some reason there’s always someone who thinks I should be available 24/7 on demand for them and them alone. Sorry, but I don’t work quite that way.) I do my best to make things work for everyone, but my schedule does fill up. And LOL I haven’t yet figured out how to be in two places at the same time. On one hand I apologize for not being available. But on the other hand, would you really want to work with someone who is available always? I mean, what’s that tell you about their business? One of the reasons I am busy is because I do make an effort to take care of my clients’ needs. I do work harder to make good things happen!! You know, I view this whole process as a partnership— and working together we’ll be successful in you obtaining the home of your dreams!

How much $$$ will you need?

“How Much Will I Need For A Downpayment?”

This is a question I get asked— often. And far too many people are surprised at the answer, as in “What! You mean I have ta’ have a downpayment?” (Sigh) Evidently, there is a whole lotta’ less than accurate information getting shared around the water cooler these days.

Near as I can tell, here’s what’s happening… Seems that a lot of people haven’t been paying attention to the news for the past several years. Some seem to think that nuthins’ changed from the easy money days of the early 2000’s. Back then, all one needed to do to qualify for a zero down mortgage loan was to fog a mirror. Alas, such is not the case today! No sir, we’re in quite a different lending environment. So, without further ado, listen close cuz’ here’s the skinny on what’s available in the current market-

FHA: On most FHA loans, the minimum required cash downpayment is 3.5% of the purchase price. So, on a $100,000 property, a buyer will need a $3500 cash downpayment. From time to time, FHA will run “$100 down” specials. However, these are usually limited to people in certain occupations or properties in certain areas.

VA: This loan program is available only to qualified veterans and certain qualifying spouses. No cash downpayment is required. (If you think you might qualify, but aren’t sure- then give me a call!)

Rural Development: The RD program is administered by the Dept. of Agriculture. While no downpayment is required, only homes in certain rural areas are eligible and there are income limitations too.

Conventional: With the exception of some houses that are in need of repairs (3% down on those) the standard amount required down is 5% of the price. (Note that contrary to the urban legend that no downpayment is required if the property appraises for more than the purchase price, a minimum of 5% is required regardless.)

Contracts & Rent-to-Buys: The percentage down varies greatly on these, and is a matter totally open to negotiation between the buyer and seller. And while I’ve seen as little as $1100 negotiated, more is typical. ($5000 or more makes a BIG difference in being able to buy a good house on good terms.) Plus, keep in mind that the more that’s put down the bigger the selection of homes you’ll have to choose from and the more leverage you’ll have in the negotiations! But, all that having been said, I’ve helped people put together deals for just a grand or two (but it’s quicker and easier with 10 or 20K). It does take a lil’ more creativity to make that work though. The less cash you have the more creative and flexible you will need to be!

Ok, please let me know how I can be of help! Talk with you soon, Bob