For the past several years, my cousin Melanie has done my entire family a fantastic favor: She holds Thanksgiving one week early, on the weekend preceding the actual holiday.
What this means is that what is normally a stress-filled, highly dramatic odyssey for many along holiday-impacted freeways, railways and airways has become a highly attended, drama-free family event. (OK, maybe not drama-free, but as low-drama as a family affair can get!)
Instead of many couples having to alternate between his family and hers, or negotiate which side a blended family’s kids will and won’t be able to see for the holiday, everyone can basically show up — easy, peasy, lemon squeezy. (Thanks, Mel!)
While reflecting with gratitude on my quick-and-easy drive home after this year’s early bird Turkey Day, my mind gravitated, as it is wont to do, to real estate. While I’m a big proponent of avoiding premature real estate moves, there are a number of tasks that are best done before you think they need to be. These are things that tend to take longer or often turn out to be more complex than people plan for.
1. Check your credit. Everyone knows that you should check your credit, or have your mortgage broker do it, some time before you get ready to start house hunting. What people fail to factor in are the real-life turnaround times on rehabbing your credit in the event there are errors, fraudulent entries, balances you need to bring down, or trade lines (credit accounts) you need to build up in order to qualify for a home loan.
For the most part, erroneous entries should be removed/removable in relatively short order, but on occasion, something like an account that was truly, but fraudulently, opened by a relative in the borrower’s name can take weeks or months to resolve and remove. Many wannabe buyers who consider themselves uber-responsible, financially, may also be surprised to find that lenders require that they have some demonstrable history of responsibly using credit. In some cases, they will actually need to open and maintain one or more credit accounts in good standing for a short while to qualify.
2. Change your spending habits. The most-overlooked benefit of the tight lending guidelines in place during the past few years is that they motivated mortgage applicants to buckle down, get out of debt and be meticulous about their credit. In the process, people actually rehabbed their spending habits and financial behaviors way in advance of buying a home, creating a level of financial discipline that is freeing, enjoyable and stands them in good stead as homeowners over the long term.
As loan guidelines loosen up a bit, it’s still advisable for buyers-to-be to get serious about the whole picture of their finances as soon as they make the decision that they want to buy a home down the road, and clean up their spending, saving, debting and other money matters, stat.
3. Saving. I’ve seen buyers save up precisely what they need to put down on a home and pay their closing costs, not realizing that they might actually need to demonstrate several months’ worth of payments that will still be in "reserve" in their savings or investment accounts after they close escrow and deplete their cash-to-close savings.
Also, buyers who start saving late often fail to calculate for the very common tendency buyers have to increase their search price range over time, and for the costs of the fixes and furnishings they’ll want when they move in.
These miscalculations tend to result in buyers trying to get unrealistic deals on the first few homes they like, losing a few before they get real about what can truly be had for their dollar in their market.
4. Apply for tax reassessment. Don’t not apply to have your taxes reassessed because the deadline has already passed for the year. Many who hold off because they missed the deadline actually end up losing track of this to-do list item and forget to come back around to it. If you’ve missed the deadline to apply to have your home’s assessed value reduced for property tax purposes, just apply anyway — early for next year.
5. Talk to a real estate or mortgage broker. Don’t delay. Real estate and mortgage brokers are a wealth of information that has the power to take your mental estimations of what will be involved and required to buy or refi or sell into the realm of a reality-based action plan. And they are ecstatic to get calls from prospective clients (that’s you) months, even years, in advance, as it makes their job, once it’s time to do it, much smoother and simpler.
Talking to a pro before you think you need to can be an eye-opening course-corrector in terms of understanding things like how much you need to put down, any work you need to do to your credit, what you can expect your home to go for or cost you, and many other expectation-managing, plan-of-action-driving essentials.