When do you need an appraisal?

It’s finally happened — after months of searching, you’ve found your dream home. It’s the perfect size for your growing family, the kitchen was just remodeled and there’s a huge deck for entertaining. And best of all, the seller accepted your offer!

As we near your closing date, your lender will want to verify the home’s value with an appraisal. This might sound nerve-wracking, but don’t worry: Appraisals protect you from overpaying.

Let’s dive into appraisals to demystify the process:

When do you need an appraisal?
If you’re taking out a mortgage to buy a new home, the lender will require an appraisal. The appraiser gives an independent estimate of the property based on recent sales data of similar homes.

When your mortgage amount matches the appraised price of the home, you know that you have a good loan-to-value ratio — and aren’t paying more than you should be.

What does an appraiser look for?
An appraiser will physically measure the home’s square footage and visually inspect the entire property. They’ll note things like:

  • Floor plan functionality and the number of bedrooms and bathrooms
  • Age of the house and its overall appearance
  • Value of any recent updates or remodeling
  • Size of the lot
  • Desirability of the surrounding neighborhood

Comparing all of that against similar nearby homes sold within the last 90 days, the appraiser arrives at your home’s value.

What if it’s valued for less than you expected?
Let’s say you agreed to buy the property for $250,000 but the appraisal came in at $225,000. Your lender won’t approve a loan for more than the appraised price.

If you still want to buy the home, we can negotiate a lower price with the seller or challenge the appraisal and pay for a second opinion.

Another option is to walk away. This may not sound ideal, and it will probably be hard to do. But our goal is to get you the right home at the best price.

If an appraisal comes in low, we’ll discuss all the options available to make sure you don’t overpay.

Are you ready to find your dream home? Reach out today to get started.

 

Home Financing Is Easier Than You Think

You saw an online ad for low mortgage rates and decided to apply — just to see if you qualify. Now your phone is buzzing nonstop, and lenders are emailing you about “DTIs” and W-2s.

The onslaught of financing questions can be baffling when you’re tackling them alone. But it doesn’t have to be that way.

Looking for some insight to make financing more straightforward? These four tips will get you started:

  1. It’s okay to play the field.
    Don’t be afraid to apply for several loans with different lenders to compare the terms and rates. You can — and should —  shop around.

Just be sure to do so within a set time period to avoid multiple credit inquiries.

  1. Manual underwriting can help you qualify.
    Most lenders automate their approval process to speed up transactions. However, if you fall outside conventional requirements, they can’t see your full financial picture. That’s where manual underwriting comes in.

Buyers with concerns about their income or credit should verify that their lender will manually underwrite the loan if needed.

  1. Broaden your prospects with a fixer-upper mortgage.
    Buying a fixer-upper can give you more home at a lower price. Did you know that the Federal Housing Authority (FHA) and Fannie Mae offer loans that will cover the mortgage and necessary home repairs?
  2. You don’t need 20% down.
    Perhaps the biggest homebuying myth is that you can’t buy without 20% down. But you can. Here’s how:
  • Low Down Payment Options: FHA loans only require 3.5% down with a FICO score of 580 or higher, or 10% down with a score of 500 to 579.
  • 0% Down Options: Buyers shopping in rural areas may be eligible for a USDA loan with 0% down. For qualified veterans and active-duty military members, VA loans often have no down payment requirement.
  • Buyer Assistance Programs: There are down payment and closing cost assistance programs available to first-time homebuyers. Not a first-timer? Some are also available to those who haven’t owned a home in the past three years.

Mortgage financing can feel overwhelming. But you’re not in it alone.

Reach out today for a referral to a trusted lender to get preapproved for your next home.

It’s not TV. It’s your bottom line.

TV shows make finding a profitable fixer-upper seem easy. But in the real world, there are real challenges and decisions to be made.  

Whether you’re buying an investment property or a starter home for your family, there are dozens of factors to consider. How much will it cost to renovate? Are home values rising or falling in the neighborhood? How in-demand is the area? 

Want to make sure your purchase isn’t a money pit? Ask yourself these four questions:

1. Does it have good bones?
We want to avoid expensive repairs that would eat into your bottom line. It’s vital to have structural elements like the roof, foundation, plumbing, electrical and HVAC system inspected. 

2. Is the price comparable to the area? 
The property may come at a fixer-upper price, but how does it compare to others in the area? Let’s also take a look at new developments or zoning laws that could influence future home values.

3. Does it need special inspections?
Fixer-uppers need to go beyond standard inspections. Things like sewer lines, septic systems and pools age with the property, so it’s important to have each evaluated. 

4. What does your contractor think?
Bringing a contractor on board early is essential when creating your renovation budget. We need to estimate the cost of any aesthetic changes or upgrades to avoid overimproving the home.

Remember, it’s not just the sticker price you want to consider when buying a fixer-upper, but the cost of the entire project. 

Do you need help finding the fixer-upper of your dreams? 
Together, we can evaluate the purchase price, factor in repair costs and determine the future resale value of the home. 

If you’ve already got your eye on a fixer-upper, or want help finding a contractor in our area, get in touch today.

6 Ways to Improve Your Odds of Getting a Home Loan

Buying a home is one of the biggest financial transactions people experience in their lives, so it’s no wonder financing is one of the biggest challenges buyers face when shopping for a new home. Even though the money components of home shopping can be stressful, the good news is there are steps you can take to ensure a smoother process and hopefully improve your odds of getting approved for your home loan.

1. Get Pre-Approved Early

If you want to be ready to make an offer on a home as soon as it hits the market, consider getting pre-approved or pre-qualified early in your home search. Having this pre-approval will help you move fast when you find the perfect home. It’s also typically the first thing an agent will ask you to do before helping you with your house-hunting journey. So getting it done before talking to an agent will show that you’re serious about buying and ready to start touring homes immediately.

According to the Zillow Group Consumer Housing Trends Report 2017, the vast majority of people who financed their home with a mortgage in the last year got pre-approved (92 percent), but it’s when they got approved that is the real differentiator.

A little over a third (35 percent) of buyers got pre-approved before involving an agent, while 50 percent waited until they involved an agent before they got pre-approved. Buyers who use an agent are more likely to obtain pre-approval than those who don’t work with an agent, indicating pre-approval is either a prerequisite to securing an agent or highly recommended by their agent.

2. Get a Fully Underwritten Pre-Approval

If you want to take an extra step and do some work upfront to get your offer to stand out, consider asking your lender for a fully underwritten pre-approval. This will not only help speed up the mortgage process even more, but it will also show that you are a serious buyer who has been vetted.

During this process, a lender will verify the information in your mortgage application, your income, assets and debts, and send your loan through the underwriting process so that you can quickly get final approval for a loan once you’ve found your home and your offer has been accepted. So long as your financial condition and creditworthiness hasn’t changed since you were pre-approved, and the home meets other “closing conditions,” you’ll be approved for the loan.

Doing this work up front will allow you to close quickly, opposed to the sometimes-lengthy time frame of these steps once the offer is accepted.

Even though getting fully underwritten sounds like more work initially, you’ll have to go through this process in the later stages of the process anyways, so getting it out of the way early may save time in the long run and help you stand out.

3. Get Your Credit in Check

One of the most crucial component of getting approved for a home loan is your credit score. Not only does it have a huge financial impact by helping determine your interest rate, but lenders will also use this number to determine if you will be approved for a loan. Getting a firm grasp on how your credit is early in your home search could give you the time you need to improve it, if necessary.

Even if you think your score is good enough, it’s a good idea to get a copy of your credit report and take time to review it for any errors. Sometimes, boosting your credit score can be as simple as disputing errors. But if you catch them late, you may not have enough time to dispute before locking in your mortgage rate.

It’s also a good idea to not open any additional lines of credit to reduce further scrutiny from lenders.

4. Demonstrate Financial Stability

When lenders assess whether you qualify for a loan, they’re looking to make sure you’ll be able to repay the loan and not default. You can improve your chances of qualifying by demonstrating that you’re financially stable.

Limiting your spending is one of the easier ways to make sure your lender doesn’t find any red flags when reviewing your financial history. Lenders generally don’t like to see a number of big purchases recently made. And just as much as they don’t like seeing big purchases, they don’t want to see that you’ve missed payments either, so make sure your payments are on time.

To help ensure that you aren’t likely to miss payments, lenders like to see work consistency. If you’re able to, try not to change jobs during this process as the lender might think you no longer have the same funds to afford the mortgage.

5. Put More Down

Even though coming up with enough money for a down payment is often a buyers’ biggest hurdle during the buying process, if you’re able to make a larger down payment (of 20 percent or more), you might up your odds of getting approved.

A large down payment can show lenders you’re serious about buying and have the money to prove it. Outside of a larger down payment giving off the impression that you’re more trustworthy as a borrower to a lender, it can also reduce the loan-to-value ratio, which can increase your chances of getting approved for your loan.

Not only is a larger down payment a plus for lenders, but it can also help make your offer look more attractive to sellers and help them feel more confident that your financing is secure, which could help increase your odds of landing the home over someone else.

6. Move Quickly Once Your Offer Is Accepted

Unfortunately, there are a number of ways mortgages can fall through once your offer is accepted. But if you’re able to speed up the loan, inspection and appraisal periods, you might find yourself coming out ahead.

In some markets, the appraisal can take a particularly long time. So, to speed this process up, ask your lender to order the appraisal the day your offer on the home is accepted. Getting it done quickly may give you time to address any issues that arise.

For example, if the home is appraised for less than the sale price, you can still make concessions with the seller in hopes of getting the loan to go through. Some buyers find luck by paying the difference in cash, getting a second opinion on the appraisal or asking the seller to reduce the price of the home. If the buyer and seller can’t come to an agreement on one of these terms in time, the pending sale can fall apart.

Another step you can take to ensure a smooth, speedy process is to schedule your general home inspection as soon as your offer is accepted. That way if the inspector finds something wrong, you’ll have time to bring in a specialist to take a look. In competitive markets, some buyers even opt to do a pre-inspection to make their offers more competitive, while also removing potential obstacles that could prevent them from getting the house.

New Homes vs. Old Homes: Which Is Right For You?

 

What does your dream home look like? Is it a classic Victorian set far back from the road with stately elm trees shading the formal garden, or a brand-new split level in an up-and-coming housing development with a communal pool, tennis courts, and a playground for the kids?

Old vs. new: It’s an age-old debate. And when it comes to choosing whether to purchase an existing home or opt for new construction, there’s a lot more to factor in than the curb appeal or how it would look dressed up in Christmas lights.

For most of us, a home (new or existing) is the biggest purchase we’ll make in our lifetime, so it’s critical to make the right decision.

Do homes really age like fine wine, or is newer always better? Let’s explore.

The Pros of Buying a New Construction Home

To some, a new home is the ultimate status symbol; others simply enjoy the convenience and peace of mind that comes with new construction. And there’s no denying that brand-new homes have their fair share of benefits. Let’s take a look at the pros of newly-built homes.

  • Builder’s warranties. New homes generally are backed by a builder warranty for the first 10 years or so. Your roof (probably) won’t leak, and if it does, it’s covered, along with most of all the other structural components of your home.
  • Customization options. When you work with a builder, you have more freedom to customize your new home. Go ahead and get the granite countertops you’ve always dreamed of, or the sunken garden tub in the master bath. (Just be aware that these “extras” come at a price.)
  • Less maintenance. New appliances, wiring, and plumbing mean that things are less likely to break down right away. You may have years or even decades before you’ll have to worry about replacing the dishwasher or having a plumber come to work on the bathroom sink.
  • More neighborhood amenities. Since new construction tends to come in the form of subdivisions, you may enjoy things like a neighborhood clubhouse, pool, playground, or other recreational facilities.
  • Energy efficiency. Double-paned windows, HVAC systems, energy efficient appliances, and adequate door and window seals keep energy in, lowering your heating and cooling bills and saving you money over the life of the home. You may even get certain tax rebates or incentives for promoting energy efficiency.
  • “Smart” features. Builders have jumped on the smart home bandwagon, and a new home will more likely feature high-tech amenities like built-in USB adapters, whole home speaker systems, thermostats you can control from your smartphone, and more.
  • Less competition. In a hot market, existing homes can be snatched up quickly, often before the listing ever goes live. Since builders often construct dozens of new houses at a time, it’s easier for you to get the home of your dreams without having to stand in line or engage in a bidding war.

The Cons of New Construction Homes

A new home isn’t all shiny appliances and Alexa-enabled bathrooms. For all the benefits of new construction, there are some drawbacks, too.

  • A higher price tag. According to one source, the average cost of purchasing a new home is $300,000, versus $278,000 for an existing home. Sure, you may recoup that difference eventually, but it’s still good for some sticker shock at the onset.
  • Strict homeowners’ association rules and fees. The amenities that were a pro in the last section could very well become a con eventually. Someone has to pay for that pristine neighborhood pool and state-of-the-art fitness center, and that “someone” is likely you. HOA fees can range from $200-$400 per month—and that’s not to mention the strict rules that come along with the privilege, like having someone tell you what color your house can be painted and when to mow your lawn.
  • Higher property taxes. Generally speaking, the more your home is worth, the more you’ll be shelling out to Uncle Sam for property taxes. And in new neighborhoods with higher than average property values, that can be a pretty penny.
  • Location, location, location. There’s no room for new construction in populated cities, which means that most subdivisions are on the outskirts or beyond. This can lead to an increase in commute time and/or more money you’ll need to shell out for public transportation.
  • Uncertainty. That shiny new subdivision looks good now, but how will it look in 10 years? What if half of the houses go unfilled, or the neighborhood deteriorates considerably? What if that gorgeous field behind your back deck is bought up by a sewage treatment plant? All neighborhoods can change, but it’s particularly difficult to project how a brand-new neighborhood will shake out.

The Pros of Existing Homes

While some love the “new home smell,” others are equally enamored with the homes of yesteryear—whether that means a 5-year-old ranch-style home or a 19th century Craftsman. And there are some definite pluses in the existing home column.

  • Cheaper selling price. An existing home can be 20% less expensive than a new home, allowing you to effectively get more house than you could have otherwise, had you chosen a new construction.
  • Lasting construction. When it comes to purchasing existing homes, the phrase “they just don’t make ’em like they used to” gets thrown around a lot—but for good reason. Where today’s newer homes sometimes seem to feature construction materials made by the cheapest bidder, older homes were built to stand the test of time—and they’re still standing. In many cases, you can expect solid construction through and through.
  • Location, location, location (again). These existing homes were built when the city was less crowded. You might find the perfect home within walking distance to your job, popular restaurants, museums, parks, and other prime destinations.
  • A history. Yes, it might sound cheesy to the “new home” crowd, but an existing home has a character that new tract houses just can’t hope to aspire to—yet. Architecture and history aficionados appreciate old-world charm and the stories an older house has to tell.
  • Established neighborhoods. Where a new neighborhood could transform completely over a decade or so, existing homes have matured along with their neighborhoods, meaning it’s less likely for drastic changes to occur, and often prohibited by zoning laws. What you see is what you get.
  • Bigger yards and mature landscaping. In a new subdivision, space comes at a premium. In some, it’s possible to pass your neighbor a cup of sugar through your open kitchen windows. Older homes tend to have bigger lots, providing more outdoor space for children, pets, and entertaining. And since the trees, bushes, and shrubbery have had years or decades to mature, the landscaping feels much more settled.

The Cons of Buying an Older Home

Old-world charm, bigger yards, and a cheaper asking price are fantastic, but they can come with some serious drawbacks, including:

  • Repairs. Older homes are notorious for needing repairs. Sometimes it’s something relatively simple, such as replacing the water heater. Other times, the fuse box explodes on Monday and the septic tank overflows on Wednesday. When buying an existing home, it’s crucial that you have an emergency fund set up to handle any unexpected home repairs.
  • Trouble obtaining financing. Some homes pass inspection with flying colors, and the loan goes through immediately. For others, the home inspection leads to tons of unforeseen problems and can cause your lender to back out of the deal. Existing homes can be much more difficult to finance due to underlying problems.
  • Competition. There may be 20 new tract homes available, but there’s only one of this home. Competition can be fierce, and you may end up offering more than you wanted for it just so you can call it your own.
  • It may not be up to code. Outdated plumbing, asbestos in floors or ceilings, unsafe electrical wiring—the list goes on. An existing home may cost you thousands of dollars just to get it up to code, and if you’re not planning for the expense, it can be a disaster.
  • Outdated everything. If you’ve ever pined for an avocado-green fridge, stove, and oven, you may be in luck—but you’re also in the minority. Appliances and fixtures in existing homes could be as old as the home itself. You may find yourself purchasing all new appliances, which adds up over time.
  • Increased energy bills. Older homes have a tendency to be drafty, meaning your hard-earned money (literally) goes straight out the window, and updates can be expensive. For example, you’ll spend about $19,000 to reoutfit a 2,450-square-foot home with energy-efficient vinyl windows. Looking to upgrade those baseboard heaters to a full HVAC system? Expect to spend $6,000-$12,000 for a 1,000-square-foot house—and prices only go up from there.

Other Homebuying Considerations

New or old, existing or not, there is plenty of thought that must go into what sort of home you want to buy. It may be advantageous for you to take a tour of houses from both camps to better determine what best fits your needs.

You may be a staunch “new construction” buyer and fall in love with a cute little bungalow in your favorite neighborhood; you might think you want a brick home on a quarter-acre lot only to be wooed by the technology and convenience of a newly-built home.

Buying and Selling a House at the Same Time: Where to Begin

Buying a new home while selling your current one is a balancing act. Here are some practical tips to help you succeed as both a buyer and seller.

Buying a new home at the same time as you’re selling your old home is all about timing — and some luck, of course. And while you can’t control everything that happens during the complicated buying and selling process, there are some things you can do to set yourself up for smooth closings — maybe even on the same day!

Consider this key information on how to buy and sell a house at the same time.

Evaluate the local housing market

The state of the real estate market in your area is often the biggest factor in timing your home purchase and sale correctly. Knowing what kind of market you’re in is important whether you’re just moving across town, or if you’re moving across the country. If you’re selling in one market and buying in another, you’ll need to factor that into your timing. The length of time it takes to buy and sell can vary dramatically depending on the local real estate scene.

What is a buyers market?

In a buyers market, there are more homes available than people looking to buy. In a buyers market, you’ll likely have an easier time finding your new home than you will selling your old home. Sellers may be willing to accept a contingent offer, which means you agree to purchase their home contingent on selling yours first — more on that later.

What is a sellers market?

In a sellers market, there are more buyers in the marketplace than there are homes available. In a sellers market, your current home will likely sell more quickly than you’ll be able to find a new home. Consider asking your buyers to do a rent-back after closing to allow you time to find your new place.

If you’re in a…                       What to do
Buyers market Make an offer with a sale and settlement contingency
Buyers market Request an extended closing
Sellers market Make an offer with a settlement contingency
Sellers market Ask for a rent-back agreement

Choose an experienced real estate agent

Buying and selling at the same time can be complicated and at times overwhelming, so it’s helpful to have a pro by your side. An experienced local agent will not only be able to help you determine the market value of your home, but they’ll be able to talk you through timing, strategy, and negotiation.

An agent can guide you to a listing price

In addition to answering questions about process and helping you negotiate, one of the most important roles your agent plays is to help you find the perfect listing price — one that will help you sell on your desired timeline and for enough money to help you take that next step. They’ll use their local market expertise and comparables to inform the price.

Understand your financials

After you’ve chosen an agent and gotten a feel for your local market, it’s time to know your numbers. Reach out to both your mortgage lender and your financial planner to see what’s feasible based on your financial situation. The amount of liquid cash, the amount of equity in your home, and the loan products you qualify for can all factor into which path you take.

Determine your home’s likely resale value

Part of researching your equity is knowing how much your house will reasonably sell for in the current market. Consider completing a pre-inspection so you know how much work needs to go into your house before selling, or the types of concessions you’ll have to make to a buyer to cover those repairs.

Know how much equity you have in your home

If you’re selling a house with a mortgage, do some initial research to find out how much equity you have — meaning the amount left over when you take the current market value of your home and deduct what’s remaining on your mortgage. Also, consider if you’d be able to purchase without tapping into that equity. Remember, the equity you have in your home won’t be accessible until after the sale closes.

Buying a house before selling

If you choose to buy a second home before selling your current home, here are some ways to make it happen:

  • Make an offer with a sale and settlement contingency:  In this scenario, you’ll focus on finding a new home before you list the old one. Once you find a house you love, you’ll submit your offer with a sale and settlement contingency, which means you’ll buy the home only if you can successfully sell your existing home. Typically, the sellers of the home you’re buying are still allowed to seek other offers, but you’ll receive the first right of refusal if you’re unable to remove the contingency when a second offer comes in. Contingencies typically work best in buyers markets, when the seller is less likely to get another offer.
  • Request an extended closing: If you’re confident that your existing home will sell in a short period of time, you can request to extend the closing date of your new home, past the standard 30-45 days. This will give you enough time to sell your current home and use your home equity to buy another house. Just like with contingent offers, you’re more likely to have success with this strategy in a buyers market.
  • Purchase with significant savings: If you’re in the financial position to do so, the simplest route is to use your savings to pay your new down payment, then sell your old home after the dust settles. Keep in mind that you’ll also need money to cover closing costs, inspections, and moving expenses.
  • Purchase with a HELOC: A HELOC, or home equity line of credit, allows you to borrow against the equity in your current home. If you qualify, you could use a HELOC to access money for your down payment, then pay it off when your home sells.
  • Purchase with a bridge loan: A bridge loan is a short-term loan offered by a bank to cover your down payment, just until your sales close. Make sure to talk to your banker about this option early in the process, because not all banks offer this product and it can be hard to qualify.
  • Rent out your first home: If you don’t need the money from your first home to make your down payment on the new home, you could always find renters for your old home, which would allow you to cover the mortgage costs while delaying the need to sell at the same time as you’re buying

Pros of buying before selling

  • You have somewhere to move right away.
  • You only have to move once, which allows you to save money on storage units or temporary housing costs.
  • You’re less pressured to make quick buying decisions, as you can always stay in your current home a little longer if you don’t find a property you love.

Cons of buying before selling

  • You may feel rushed to sell, which may lead you to take a lower offer than you would otherwise.
  • Contingent offers are less competitive, especially in fast-paced markets.
  • You may not have enough cash to make a competitive offer if your money is tied up in your current home.
  • If you decide to rent out your current home, being a landlord isn’t always a walk in the park. And, when you do decide to sell, it can be a challenge to sell while tenants are living in the home.

Selling a house before buying

If you’ve decided to sell your current home first, here are some steps you can take to make the process a bit smoother.

  • Make an offer with a settlement contingency: In this case, you’ll list your house first, then once you have an offer in hand (but before closing), you start looking for your new digs. When you find a house you love, you’ll submit an offer with a settlement contingency, which means you’ll buy the home contingent on the sale of your existing home closing. This works best in a seller’s market, where you can expect to receive offers on your existing home fairly quickly.
  • Find a temporary rental to live in: Yes, you’ll have to move twice, but sometimes closing one sale before starting another one can be the least stressful option, as it takes the pressure off the timing and gives you the time to find a home you really love.
  • Sign a rent-back: A rent-back provision is when you go through with the sale of the home, with the agreement that you can rent the home back from the new owners (and keep living in your home) for 60-90 days. This option can give you more time to shop for your new home, while still giving you access to the money from your sale. Keep in mind that this option works best in a sellers market, where buyers have to be more flexible with contract terms in order to get the home they want.

Pros of selling before buying

  • You know exactly how much equity you’ll have available to put toward your new home.
  • You can easily roll your existing equity into the new purchase.
  • It can be less stressful to close the book on one chapter before focusing on your next move.

Cons of selling before buying

  • You’ll likely have to find a temporary living situation.
  • Storage and double moving costs can add up.

 

Everything a first-time homebuyer needs to know to seal the deal

A recent news story from Bloomberg claimed starter homes are pricier than they were at pre-recession levels and the typical first-time home buyer now needs nearly 23 percent of their income to afford the typical entry-level home, according to data from the National Association of Realtors.

Even as prices gradually decrease and inventory rebounds, modest cooling in the housing market really only helped high-end markets.

The high barrier of entry, however, has presented real estate agents with a great opportunity to showcase their skills and knowledge of specific markets.

In San Francisco, where prices have soared, Sabrina Gee-Shin, a Realtor with Zephyr Real Estate, takes a three-pronged approach to dealing with first-time buyers. “You have to sit down and talk about what’s really important to the client – assess how bad they want it and their capacity [to buy],” she said.

“A huge part is educating clients about the reality of this current market,” she added. “I’m not into clients spending time going to open houses. That’s not a great use of their time to be in this dreamy dreamy land versus asking, ‘can I do it,’ ‘can I do it a year from now,’ ‘maybe I can if I ask my mom for a gift.’”

“From there, talk to lenders and a get a real sense of, is it possible?”

From there, once the client understands their reality better, then they strategize. A big part of that, especially in San Francisco, is introducing clients to neighborhoods and areas with which they may not be familiar.

Brandon Doyle, an agent with the Doyle Real Estate Team at Re/Max in Minnesota, also believes it’s important for first-time buyers to understand their lending options prior to starting the house hunt.

“Buyer’s should get pre-approved with a lender prior to going out looking at homes,” Doyle said. “That way they have a better idea of what they can afford with a payment they’re comfortable with.”

Doyle added that agents should help customers look for local down payment assistance – like the deferred payment loan program offered by the Minnesota Housing Finance Agency. “Depending on where they’re buying and income restrictions they may qualify for assistance,” Doyle added.

As for housing hunting, Doyle tells consumers to be prepared to act fast – with limited inventory, oftentimes buyers are competing against multiple parties, he said. Doyle also helps them understand the market, and how it changes depending on the season.

“You may not be able to get everything you want in your first home,” Doyle said. “It is important to have realistic expectations. Certain markets such as Minnesota are very seasonal, purchasing a home in the “off season” when the market has cooled down may give you a better chance to compete.”

Karen Daily Ekofo, a settlement attorney at Ekko Title in Virgina, echoed those sentiments.

“Having a good lender who understands the programs offered to first-time homebuyers is a huge plus,” said Efoko. “They can talk to the first-time homebuyers about all options.”

In Virginia, for example, Efoko said you’re eligible for homebuying assistance from first-time buyer programs if you haven’t owned a home in the prior three years and qualify under income requirements.

Efoko offered another good piece of advice for consumers or the agents they hire: find a person who is really good at helping repair credit scores.

Kristin McFeely, a Philadelphia-based real estate salesperson with Compass, similarly expressed the importance of consumers securing financing.

“One of the first things is to get their financing squared away so that if they see a property they want to move on, they are prepared and have a pre-approval on hand,” she said. “The lender the buyer selects often plays as important a role as the type of financing they are getting. I always recommend a local lender.”

In a tight market, agents also need to inform buyers of their financing options, whether it be through a large deposit, a quick close or waived or shortened contingency periods. McFeely said agents should also understand the terms of an escalation clause – a contact where the buyer agrees to raise their offer incrementally depending on competing offers – before an offer is submitted.

“Prep work is so important in this tight market,” McFeely added.

Email Patrick Kearns

5 Mortifying Reasons Mortgage Applications End Up in the ‘Reject’ Pile

Picture this nightmare: You apply for a mortgage, but your application gets rejected. Suddenly, you’re hit with an overwhelming wave of embarrassment, shock, and horror. It’s like having your credit card denied at the Shoprite. So. Much. Shame.

Sadly, this is a reality for some home buyers. According to a recent Federal Reserve study, one out of every eight home loan applications (12%) ends in a rejection.

There are a number of reasons mortgage applications get denied‚ and the saddest part is that many could have been avoided quite easily, had only the applicants known certain things were no-nos. So, before you’re the next home buyer who gets burned by sheer ignorance, scan this list, and make sure you aren’t making any of these five grave mistakes, which could land your mortgage application in the “no” pile.

1. You didn’t use credit cards enough

Some people think credit card debt is the kiss of death … but  guess what? It’s also a way to establish a credit history that shows you’ve got a solid track record paying off past debts.

While a poor credit history riddled with late payments can certainly call your application into question, it’s just as bad, and perhaps worse, to have little or no credit history at all. Most lenders are reluctant to fork over money to individuals without substantial credit history. It’s as if you’re a ghost: Who’s to say you won’t disappear?

According to a recent report by the Consumer Financial Protection Bureau, roughly 45 million Americans are characterized as “credit invisible”—which means they don’t have a credit report on file with the three major credit bureaus (Equifax, Experian, and TransUnion).

There’s a silver lining, though, for those who don’t have credit established. Some lenders will use alternative data, such as rent payments, cellphone bills, and school tuition, to assess your credit worthiness, says Staci Titsworth, a regional manager at PNC Mortgage in Pittsburgh.

2. You opened new credit cards recently

That Macy’s credit card you signed up for last month? Bad idea. New credit card applications can ding your credit score by up to five points, says Beverly Harzog, a consumer credit expert and author of “The Debt Escape Plan.”

That hit might seem minuscule, but if you’re on the cusp of qualifying for a mortgage, your new credit card could cause your loan application to be denied by a lender. So, the lesson is simple: Don’t open new credit cards right before you apply for a mortgage—and, even if your lender says things look good, don’t open any new cards or spend oodles of money (on, say, furniture) until after you’ve moved in. After all, lenders can yank your loan up until the last minute if they suspect anything fishy, and hey, better safe than sorry.

3. You missed a medical bill

Credit cards aren’t the only debt that count with a mortgage application—unpaid medical bills matter, too. When you default on medical bills, your doctor’s office or hospital is likely to outsource it to a debt collection agency, says independent credit expert John Ulzheimer. The debt collector may then decide to notify the credit bureaus that you’re overdue on your medical payments, which would place a black mark on your credit report. That’s a red flag to mortgage lenders.

If you can pay off your medical debt in full, do it. Can’t foot the bill? Many doctors and hospitals will work with you to create a payment plan, says Gerri Detweiler, head of market education at Nav.com, which helps small-business owners manage their credit. Showing a mortgage lender that you’re working to repay the debt could strengthen your application.

4. You changed jobs

So you changed jobs recently—so what? Problem is, mortgage lenders like to see at least two years of consistent income history when approving a loan. As a result, changing jobs shortly before you apply for a mortgagecan hurt your application.

Of course, you don’t always have control over your employment. For instance, if you were recently laid off by your employer, finding a new job would certainly be more important than buying a house. But if you’re gainfully employed and just considering changing jobs, you’ll want to wait until after you close on a house so that your mortgage gets approved.

5. You lied on your loan application

This one seems painfully obvious, but let’s face it—while it may be tempting to think that lenders don’t know everything about you financially, they really do their homework well! So no matter what, be honest with your lender—or there could be serious repercussions. Exaggerating or lying about your income on a mortgage application, or including any other other untruths, can be a federal offense. It’s called mortgage fraud, and it’s not something you want on your record.

Bottom line? With mortgages, honesty really is the best policy.

For more smart financial news and advice, head over to MarketWatch