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2017-05-18 21:50:24
First Time Home Buyers!!! Stop Spending Now!

First time home buyers are wonderfully informed people that are making all the right decisions to make sure they know how much house they can afford, how much home interest they should pay, and they know how to budget to make sure they know how much house they can afford.

 

One of the most common pitfalls, and a nearly devastating one, is not knowing the chain of events from the time you submit your pay stubs, bank statements, and tax returns to your lender for pre-qualification and the day before your first home closes escrow.

If you are like many of my first time home buyer clients you have steady income, are driving older cars, have money in the bank, and have been cutting corners to save enough money for your part of the down payment and closing costs. Many of my clients have all or part of their down payment gifted to them (it is legal!).

 

So there you are, you've go the money in the bank, you have searched high and low for the right house, your Clairemont Realty broker has done an awesome job in this competitive market and got your offer accepted and you are on cloud nine! Everything is coming together just as you'd hoped and you'll even have money in the bank after you buy the house. You'll spend it on a new sofa, some landscaping maybe, some repairs, and you'll still have money in the bank. Life is good!

 

That feeling of satisfaction can fade fast about two days before escrow closes. You see, there is this thing you remember from when you started your search called a debt to income ratio. That is the amount of debt you are allowed to have for the house and the total amount you are allowed to carry, when you get the loan. But wait! We are doing great! We are going to travel after we get settled in the house and we got a great deal on the airline tickets, London tours, and hotels! We even got a rental car so we could tour all of Europe! And we got airline miles on our Capital One VentureOne Reward Card for the purchases! That is fantastic! NOT.

 

You've just sabotaged your lender's ability to fund your loan! Not only have you maybe lowered your FICO score by borrowing more money but you also increased your debt!

 

The part you may not be aware of is that a couple of days before closing your loan (when you buy the house) the lender always pulls another credit report to see if there has been any additional activity!

Yikes! You just heaped on $5,000 for a vacation! That changes your debt to income ratio and now you probably don't qualify for the loan. At this point the lender may issue you an ultimatum; pay off the new debt in cash from your bank account and wait until they pull a revised credit report showing the change, or don't buy the house!

 

Party is over. That is what I tell my first time home buyers; the party is over. Don't spend a dime on a credit card, don't buy a new car, don't cosign for someone else's car, don't do anything until after you have the keys in your hand to your new house.

 

There are many first time buyer pitfalls. Truly they apply to all real estate buyers, but it is important to have someone help you though the process that has seen it all over the years. My 40 plus years experience can be one of your greatest tools in finding and buying your new home.

 

Call today and we'll sit down and have a frank discussion to assess where you are at, where you are going, and develop a plan to get your there!

Steve Innis, Broker

858-922-2410

 

 

 

 

 
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