Did you notice that I mislabeled my last blog? Did you, even in roman numerals, realize the discrepancy? Did you quiver with fear when I said my blog would be delivered “tomorrow” and here we are a week later with no new post? If you’ve answered ‘yes’ to any of these questions then you should seriously consider a job in “Loss Prevention” or “Risk Management” or, god-forbid, “underwriting”… If you answered no, then I have just explained away my laziness, the fact I was on vacation, and a simple typo with enough logic to convince you it was planned. It wasn’t.
Underwriters (the people who approve or deny your loan request) view these things and more… I give you the perspective of someone on the sales side of the banking equation, credit people on the other hand, especially nowadays, are looking for any and every reason not to give you a loan or a mortgage. My humble reader, do not take it personally, it is simply a matter of fact… Right now, lenders want to lend to only the most lendable, and there are sometimes incentives to *not* loan! Couple that with the fact that ‘credit people’ have the sourest and most apocalyptic views on most anything and anybody. Their numbers speak for them, and if you aren’t ready, you aren’t getting a loan. And if by chance they are willing to consider it, you will almost wish they hadn’t.
That’s why your best rates can usually be found, no surprise, at your friendly neighborhood credit union. However, as with all things, it is best to thoroughly investigate all options before jumping into a 30-year relationship, with the mortgage consider nothing but the total cost! Because there are ways they can screw you while giving you a nice low rate, whether bank, credit union, or mortgage broker.
Now I am not a mortgage broker or a realtor, and I am not going to sit here for one moment and pretend that I am, as that would be a great disservice to you, my readers. Instead, I am going to wholeheartedly recommend that you find yourself a staff of professionals to help you through something as complicated as buying a house. Think of them as your ‘Queer Eye for the Straight Guy’ for the real estate world. Your Faaaabulous house buying crew! Let’s meet them! *start house music*
First of all, your Realtor! *comes out prancing and twirling* it is their job to make sure you aren’t getting screwed! Your realtor is your personal line of defense, your praetorian guard. It always helps to get someone you trust, because someone in such an important role is also best equipped to screw you. Many an unscrupulous Realtor during the mortgage crisis formed up with others in complementary fields (appraisal, mortgage) to maximize their own profits while seriously screwing their clients. You probably don’t want to pick your Realtor out of a phone book or off Craigslist; the best way is to have someone you know personally, or to get a referral from someone who had a good experience. A good one is worth their weight in gold, even if those are their demands.
Second, it’s that bad boy you hate to love and love to hate, your Mortgage Broker! *walks out and ‘pops his collar’* A mortgage broker works as a freelance headhunter, pairing people who need mortgages with those willing to give them. Unlike a Loan Officer (who makes loans directly for a bank), a mortgage broker typically offers products from several lenders and is typically paid more per loan. This incentivized a lot of brokers to commit horribly criminal acts that were completely legal during the housing boom which has since gone bust. However, the added competition and the fact that they have to disclose more detailed information to the borrower than banks do, is a good reason to consider going with one! Like I said before, do your research! Which is a segue into our last and most oft overlooked party in a real estate transaction… the man with ‘the man’s’ plan in his haaand! Your friend and no one else’s, at least while under retainer, your… Real… Estate… Attorneeeeeyyyyy! *Power walks to the end of the catwalk*
Our government in the US is composed of three branches, the Legislative, the Executive, and the Judiciary. While the first two fuck around with and tinker and try to make things work to their interest, or what they perceive our interests to be, the Judiciary is there to put a stop to any bullshit they may try to pass off as fact or law. This is a perfect analogy for the place of the real estate attorney in your trio of advisors. It is sad, but a real estate attorney is not a mandatory part of the home buying process, because they really should be. Loans are pretty damned complicated. If you read the covenants and the “if, and, but” you may end up not knowing which way is north and which way is south. Most people, and this is no insult on anyone’s intelligence, cannot understand legal documents. That’s the whole reason lawyers get to charge what they do, because they can understand them. The problem is compounded when you live in an area with large populations that either don’t speak English or speak it as a second language, more often than not people in this demographic get targeted due to their weakness in the language and limited understanding of the legal system. It is a deplorable practice, but in 2004, people weren’t asking questions and were handing out loans without income verification.
A wise person, a truly wise person, knows their faults and readily admits them. But furthermore, they know that when treading into unknown waters, it is wisest to hire a guide. Far too many people are far too cocky when it comes to admitting they need someone’s help, it’s like refusing to ask for directions, except that it could end up costing you tens of thousands of dollars more. A real estate attorney will do more than just read contracts for you, they will look into local community laws, association laws, miscellaneous ordinances, that may change your mind about buying that house. Remember, your typical association has a whole set of rules as well, which are written in the spooky and mystical language of law and legislation. You may find your association has a clause where members have to pay for a broken elevator in case of an emergency, and that in such a case the cost is equally split among the units, and your proportional share could be $10,000. A rudimentary example, not at all written in legalese, but if it were you probably wouldn’t have understood it.
Now that we have our fabulous crew in place, or even BEFORE we get our fabulous crew in place, we must take a moment to do something very important. Look in the mirror, look deep in the mirror and KNOW THYSELF. No, seriously, know thyself! Because you are about to enter into a very, very long commitment and you do not want to enter into it foolishly. How much can you realistically afford to spend on a house? And by realistically, I mean will there be money after each pay check to put away for savings, or 401k, or for your kids’ college plan, or Christmas presents or illness or whatever might arise? If the answer is no, think about a smaller house or think about renting. Owning a home is not an investment, as people love to say. Owning a home is just that, a roof over your head, a place that belongs to you. Do not confuse the two and rationalize a lack of saving money because you are ‘investing’ in a house. This is the biggest mistake people of this generation make, our grandparents and parents did not view their homes as investments.
There is a lot more that goes into buying a home than just the mortgage. Consider taxes, insurance (which in Florida is essential and expensive), money for repairs, utilities, association fees (if applicable) and any added costs that buying a home would incur. Can you really afford this place? In other words, if you lost your job for any reason would you be able to pay that monkey on your back until you found a new job? These are tough questions, and we often prefer to ignore the tough questions, but we do so at our own peril. So how do we avoid these mistakes? We use the interwebs! There are a plethora of sites out there that offer mortgage calculators and personal finance calculators that will help you understand what you are truly getting into, use them, even if you don’t like the results. As the old saying goes, Caveat Emptor Let the buyer beware!
That being said, if you pass the gauntlet, this is a fan-fucking-tabulous time to buy a property in south Florida. The prices are very nice and there are government deals and tax credits galore for those who qualify (Check out the FHA website for some of these programs). But remember, once you do decide to buy, be a good emperor and gather your loyal advisors.
I want to end on a very serious note here. Buying a house is one of the biggest decisions you will make in your life. There has been, in recent years past, a certain casino aspect to owning a home, with middle class dimwits walking around talking about ‘flipping properties’. When it came down to it most of them were ‘flipped’ on their back and forcefed foreclosures. I have tried to stress throughout this series an emphasis on personal responsibility… This is especially important when you buy a house, as it is no laughing matter. This decision must be viewed with the gravity of marriage or entering into the catholic priesthood. A diamond is forever, but sometimes, so is a mortgage. In the end, if you bite off more than you can chew, even if you walk out of it with your wallet intact and a ten year stain on your record, what should really be upsetting is all the money you poured into something which you have now lost. That is the saddest part of playing the real estate game. In short, it isn’t a game, don’t act like it is, because in most games of chance, the house has the advantage. This would be no different.
Tomorrow we reach the final leg of our financial quest! The Wild and Wonderful World of Winvestment! …Sorry, had to get that last ‘W’ in there, and now that I look at it, I like it!
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