The Cart Before the Horse

It’s opening night for a Broadway show and you have the lead role. It’s the opportunity of a lifetime. But wait…’ve never been to a rehearsal. How will you perform? Perhaps it’s the end of the semester and time to take final exams. The results will determine whether or not you will be accepted into Law School…….but you never attended class and didn’t read the assigned materials. Here is even a scarier scenario. You’re about to go out to buy a home, but you have not taken any steps to find out anything about what you are getting yourself into. As ridiculous as it sounds, this is how the largest percentage of potential home buyers enter the market.

There is much to learn prior to entering the market. Primarily, prospective buyers need to understand what their buying power will be. Most real estate agents won’t begin to show property to a candidate prior to a pre-qualification being completed. To be in the best position to negotiate the best deal, buyers should call a lender as step one.

There are many elements that affect credit scores. Disputes, past payment tribulations, and reporting errors are just a few of the items that can affect a credit score, influence the type of loan programs offered, and possibly even the cost of credit extended. With enough advance time, some of these issues can be modified or eliminated. Available loan programs and pricing can potentially improve. There are many misconceptions and misunderstandings about credit. Buyers need to educate themselves.

Income is another critical area that needs to be evaluated. The self employed, hourly employees, and asset based income, may need documentation, analysis, and verification prior to a determination of available, qualifying income being made. Many sole proprietors do not understand the difference between revenue and income. Income affects qualifying ratios, thereby being a critical element in determining loan programs and potentially, the cost of credit.

How much money do you need  to buy a home? What do you have available? Do your bank statements show deposits that are not payroll related that may need to be documented? Has a family member recently given you money that may need to be documented as a gift?

Do you own a home? Will you be selling it? What are your options if the house doesn’t sell? Is renting a possibility? Do you have military service that you didn’t think to disclose?

These are some of the most important issues that need to be explored. Each buyer has an individual story that is unique. If you don’t do your homework to check out how your background affects your ability to buy, you may be in for unnecessary disappointment.

Too many of the federal regulations that exist in lending today are the result of buyers that presumably weren’t informed properly or misled before they went to settlement. Is it possible that some of the meltdown could have been avoided had buyers educated themselves prior to buying? 

If you wouldn’t get married without dating and finding out more about your spouse-to-be before you take that leap, why would you purchase a home without doing the same due diligence?






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