Real Estate
September 21, 2018
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Mortgage & housing advice to be taken with a grain of salt

By: Scott Sheldon
June 29, 2018

Buying a home or refinancing a mortgage is an incredibly important financial decision that requires careful planning and good timing. The fact of the matter is everyone has their opinion about what you should and should not do. Here is who you want to avoid when you’re pre-approved looking for a house or considering refinancing the house you already own…

Mom and dad

Perhaps they are well off financially and they bought their house at the right time. You’re looking at buying a house in 2018 thinking “Housing prices are rather high why didn’t I buy a house before?”

The reality of it is there’s no way to time it when the optimal time to buy a house is other than when you can afford the mortgage and if you’re feeling optimistic about your personal finances. That is the best time to buy.

Maybe mom and dad’s advice is put down 20 percent. That’s old school thinking and here’s why… if the market is moving at a faster rate than your ability to save you lose. You can purchase a house with as little as 3.5 percent on a 30-year mortgage payment. You don’t need 20 percent down and the advice of mom and dad may or may not be applicable. It’s your house, it’s your money and it’s your decision.

Grandma and grandpa

If only housing prices were cheap like way back when Grandma and Grandpa bought their house right? 

Grandma and Grandpa may advocate you nickel-and-dime and negotiate out of every single purchase you possibly can. Well unfortunately, the reality is many housing prices are going for asking price in Sonoma County California or in many cases even over asking. This is not the market to negotiate price in most situations.

Your accountant 

Your accountant, while they are probably your trusted advisor, may or may not be the right person to help you purchase a house. If they’re telling you not to buy a house because you choose to show less income on your self-employment for example, that’s good advice. However, in most situations with self-employed borrowers, it is a choice to write off all your expenses to show very little income and the cost of this is not being able to qualify to refinance or purchase a house.

Don’t think that your accountant is doing you a favor as they are lowering your tax exposure making it harder for you to purchase a house. The rule of thumb is, if you’re self-employed pay the piper as you’ll have the greatest chance of being able to purchase or refinance a house.

Your family member who has either never owned a home or lost one before 

Your family member who has never owned a home before is not someone you want to be getting home buying advice from. The family member who has lost their house and is jaded about the economy because they got caught up in a challenging financial predicament can be a negative drain on your desire to pursue home ownership.

Just because they purchased a house and got into a sticky mortgage situation does not automatically mean that you will. Remember, all the mortgages that are being originated today are fixed rate loans that have federal requirements called ATR which represents ability-to-repay where lenders are required to document your specific ability to repay that loan.

Your friend who is a “real estate expert” 

Your friend who is the “real estate expert” will be telling you to negotiate down every single purchase much like Grandma and Grandpa. Or they’ll tell you to try to find a foreclosure or a short sale because you’ll be able to get a good “deal.” This would have been great advice in 2012. Yet, the reality is the market we are in now is a by-product of a growing economy with low unemployment and strong job growth. Just because your friend happened to time things well does not make them an expert on whether you should or should not get a home loan.

Your contractor 

Your contractor tells you that the property that you’re purchasing needs all sorts of work and it’s going to cost thousands of dollars to repair to fix or cure whatever is wrong with the property. Know this, not everything disclosed in a real estate purchase transaction are things that need to get fixed right away. Maybe the repairs could be fixed down the line as your income and finances permit whereas some items need more attention. Ask yourself, “Is this house safe and inhabitable in the condition it’s in presently and for how long?” Let that be your guide as to what repairs need to be addressed first and you might just find most of the repairs can be fixed longer-term, perhaps to your exact specifications on how you see fit.

Here’s the bottom line when purchasing or refinancing a house - it’s your decision not someone else’s and everyone will have an idea of what you should or should not do. At the end of the day seek the advice of a quality real estate agent and quality lender who can properly advise you on if an opportunity makes sense or not. Hint, you know you’re working with a quality professional when they are willing to tell you don’t make an offer or don’t take that loan because it’s not in your best interest.

 

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.