Intero President & CEO offers his advice on how you can avoid seeing your home purchase fall through in the current market:

The latest national home sales report from the National Association of Realtors shows a 3.5% drop in July home sales from June and a 21% improvement over the same month a year ago. But that’s not the big news.

Home sales reports are pretty much meaningless when taken out of context – both in a national and local example. In this case, it’s hard to be excited by the fact that sales were up 21% from a year ago (remember: last summer’s sales were extremely weak due to the fact that many buyers rushed in the spring to get deals in place before the Home Buyer Tax Credit expired).

Instead, the most eye-catching statistic to come out of NAR’s July report was the fact that 16% of its members reported contract failures last month – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price.

This is worrisome. Though the 16% is unchanged from the previous month, it still bears a substantial number of deals that are stopping dead in their tracks. While there’s nothing buyers – or anyone else for that matter – can do about appraisals coming in below the negotiated purchase price, borrowers can prepare themselves for the mortgage loan application process:

Save money

Obvious, but often overlooked. Buying a home takes a big chunk of cash no matter where you purchase. Lenders need to know you have your own skin in the game with your cash down payment. There are many upfront fees and taxes that you need to pay in order to close. You’ll need a direct line to this money from day one of your home buying journey.

Check and proof your credit history

First things first: visit AnnualCreditReport.com to get your free yearly credit history report from each of the three major reporting bureaus – Experian, TransUnion and Equifax.

If there’s a problem – like your number is below 620 and you’re looking for a conventional mortgage – then you need to figure out if there’s anything you can do to help improve it. Keep in mind that the only sure fix for credit report problems is time. However, there are things you can do such as requesting wrong information to be fixed, lowering your credit utilization ratio (the amount of credit you use in relation to the amount of credit you have), and getting your bills paid on time. Check with your mortgage professional for more details.

Stay in your current job, if possible

Lenders like to see a solid employment situation, which often means having been at your job for more than a year or two.

Be sensible about your final offer

Work with an experienced real estate agent in your neighborhood – someone who’s seen a lot of nearby houses sell over the years, someone who’s studied the price differences and changes through time. This agent can really help you craft a bulls-eye offer that leads to the purchase price that makes the most sense for the whole transaction.

The market is full of opportunities right now. But, as a buyer, you’re going to need to be on top of your financial game to take advantage. Much of this takes time, but can be done. Talk to your mortgage professional today and get started. This market isn’t going to suddenly change, but it’s not going to be in buyers’ favor forever.

Advertisements