red flags- things to watch when you buy

Red Flags for Home Buyers

 

Red Flags for Home Buyers

In a prior post, we talked about what red flags mortgage loan underwriters look for. Here are some red flags you should know for real-estate agent, and mortgages.

Red flags for the real-estate agent

Your agent should be your partner working for you and helping you through the process. Finding a trained Realtor will weed out a lot of those problems. If you find you have an agent that isn’t working for you, don’t hesitate to let them go. Chances are, it won’t get better. And a solid Realtor will stay in touch after the purchase to ensure that you are happy with your home.
From MSN.com – 6 signs of a crummy real-estate agent:

1. Out of touch – if no one is returning your phone calls or emails, it’s time to find someone else. Being an agent is a service based business, and you don’t want to wait a whole day or week to find out about a home you’re interested in.
2. No advice – part of the job is educating people on the process, and if they’re not helping guide you in a decision, they’re not providing part of their service.
3. Insists on affiliates – if they insist you have to use a certain mortgage provider, termite inspector, etc., you know they’re biased and not out to help you.
4. Keeps it in the family – if the agent isn’t showing you properties outside of their company, then you’re not seeing all of your options.
5. Behavior problems – do some research to find out if there were any complaints lodged. The article has this link to the Association of Real Estate License Law Officials.

Red flags for the mortgage

Here’s a great list from Realtor.com:

1. Don’t put the house before the mortgage
“Don’t go out and look for a home, fall in love with one, and then go to lender and say, ‘How am I going to finance this purchase?’ Figure out what you can afford, shop for a mortgage and get prequalified, and then choose a home. That way, you’re less likely to commit to something you really can’t afford,” says Mike Fratantoni, senior economist with the Mortgage Bankers Association of America.

2. Don’t rely on the lender’s assessment of your finances
Don’t be deluded by the “financial expert” across the desk into believing you can afford more house than you think you can. A lender will know a lot about you before the process is over, but they have no way of knowing all those family finance idiosyncrasies.

“Sit down and draw up your family budget first: Here’s what we think we’d be comfortable with now, and with how that payment can vary over time,” Fratantoni says. “Then the lender can say yes or no as to whether you can qualify for that payment.”

3. Don’t choose a mortgage on interest rates alone
Skrob says some mortgage advertisements promise low rates that involve a 30-year mortgage coupled with an accelerated payment plan.

“You may decide you like that option, but you cannot directly compare the interest rate on that mortgage to other opportunities. This loan could cost more than other mortgages with seemingly higher interest rates,” he says.

4. Don’t shop less for your mortgage than you do for your house
You’ll have both for the same amount of time, so it’s wise to give them equal weight.

5. Don’t be lured by low initial payments
Some ARMs and hybrid loans can bring even the most expensive of homes within your immediate reach. But once the initial term is over – usually in anywhere from one to seven years – the interest rate adjusts and your monthly payment may skyrocket.

6. Don’t even dream of fudging financials .
Some appealing loan programs promise better rates if you have a certain income or if you’re looking at a particular type of home (historic, one in a neighborhood that’s being turned from bad to good, etc.). But don’t be tempted to tweak your numbers or circumstances to help you qualify. “Misleading a lender goes beyond just making a mortgage mistake. It’s being fraudulent. You never want to do that,” Fratantoni says.

Skrob says you should run, not walk, from any lender who encourages you to cover up past financial difficulties or stray from the truth.

The article goes into more detail, so do consider reading it in full.

Take your time to do your homework. Find out what you can afford, and research your agent as you would a contractor. In a future post, we’ll look at red flags for the property.

Did you ever have a negative experience with a home purchase?