Podcast - 1/19/24

🏡 Just applied for a mortgage? Avoid these common mistakes! 🚫💰

Buying a home is an exciting journey, but before you close the deal, there are crucial steps to follow. In our latest podcast, we share valuable insights to help you navigate this critical phase of your home buying process. From managing your finances to discussing changes with your lender, we've got you covered! 🎙️🏠

And don't forget to check out our amazing "House of the Week"! This open-concept beauty in Monrovia is a must-see with cathedral ceilings, a gourmet kitchen, and a stunning rear deck. 🌟🏡

Tune in now for expert advice and the latest real estate scoop! 📈👍 #HomeBuyingTips #MortgageJourney #RealEstateInvestment

Tom Whalen:

I'm Tom.

Jay Day:

I'm Jay.

Tom Whalen:

of Jay Day and the Day Home Team at LPT Realty with our weekly real estate podcast. Jay, I have a layman's person, a layperson's question to ask you.

Jay Day:

There's no layperson question. Tom, you're a pro now. You've been doing this almost as long as I have.

Tom Whalen:

When it comes to this, when part of it, alright, I need, I'm going to buy a house, but before I can even come to you, I need to make sure that I have my ducks in order. I need to have a mortgage, a lender going to back me up with what I'm doing. What's the first thing I do to go, when I go to see a lender or a mortgage person?

Jay Day:

Well, if you have someone, that's great. If not, we have a lender that we recommend who does an amazing job. If he says he can get the job done, he always does. The challenge is there's a lot of people that think that lenders, it doesn't matter who you use and it does. I mean, deals fall apart all the time from lenders not being able to get the job done properly. But from a buyer perspective, we also see at times the lenders don't educate and the agents don't educate their buyers on the most common mistakes that happen after people apply for a mortgage. So let's say you talk to your lender, you got your approval, and then these are the things, the most common things that happen after you have an approval that ends up turning into your loan, getting denied.

Tom Whalen:

Oh man.

Jay Day:

First thing, don't deposit large sums of cash. If you suddenly start depositing large sums of cash, the lender is going to require sourcing that income. Sourcing the income means where did that cash come from? And if you just had money in your safe, if you had money under your mattress, whatever, that is not going to be able to be sourced.

Tom Whalen:

They don't count that.

Jay Day:

No, no. So if you're, I'm going to behave myself.

Tom Whalen:

Okay, man. Look, you mentioned something earlier. You said after your loan is approved, then these things happen for it to be denied. If it's been approved, how can it be denied down the road?

Jay Day:

Yeah, so I mean, well, because people do things that it has to be traceable where it comes from. Now if let's say your family member gives you money, that's easily traceable. If it comes from their bank account, they can show where it was withdrawn. They pulled, let's say you suddenly put 15, you made a $10,000 deposit. And you don't normally have those size deposits, but you say, oh, it came from my aunt. As long as your aunt can show that that money was in her account, she took the money out and gave you the cash, that's no problem. But you are going to have to document it. Problem number two we run into is people making large purchases. They're like, okay, well great. I'm getting this house. I'm going to go to Lowe's and order all new appliances. I'm going to schedule to have carpeting done. And just as you're ready to check out the Lowe's people say, hey, if you get our credit card, we can offer you one year 0% interest. Oh, great. Well there you go. That screwed up everything.

Tom Whalen:

Why did that screw up everything, Jay?

Jay Day:

Well, everything is tied to your debt to income ratio and it was based off of what credit you had used, what credit you had available. All of that will impact your credit score and also your debt to income ratio. So you can't add anything new to that. And sometimes it sort of surprised me. Sometimes people are like, they get so excited, okay, I've got this new house coming. I'm moving, I'm going to change cars. It's like, whoa, hold on. Don't do anything until afterwards. Another thing that we've run into is people will co-sign. So let's say you've got a kid, you've got a family member and they're like, their car breaks down, they need a new car and they can't get it without a co-signer. And they come to you and say, Hey Tom. Let's say that your son comes to you and says, Hey dad, I need to get to work. My job now, I can't get to it easily and my car's just not functioning. I need you to co-sign for me. Don't worry, just co-sign. I'm going to pay for everything. But they just need your signature.

Tom Whalen:

I understand. I've heard that before, but I understand what's going on.

Jay Day:

Yeah.

Tom Whalen:

What does that have to do with me trying to be approved for a loan?

Jay Day:

Technically, once you co-sign, you are taking co-responsibility for that. So if the person you co-sign with doesn't pay, you're responsible for paying. So the way that it looks is that debt is your debt regardless.

Tom Whalen:

And this has come up.

Jay Day:

Oh yeah. Wow. And it comes up mostly the example I gave where it's a family member and their car breaks down, something happens, they need somebody to co-sign. And us being the good family members is like, oh yeah, yeah, no problem. I got you covered. Don't even think about it. Like, well, it's not my debt. I don't have to pay it. And they just don't think that the co-signing thing puts them on the hook where it really does. So super common happens quite often. Another one that happens is people will switch bank accounts don't switch your bank accounts.

Tom Whalen:

You mean during this process?

Jay Day:

Yes.

Tom Whalen:

Because why?

Jay Day:

Because you need to show, they're going to require bank statements. And again, you can still get your approval if you change bank accounts, but it makes it much more complicated.

Tom Whalen:

It makes it harder. Okay.

Jay Day:

Yeah, because they have to trace, was it, did everything come out and go into this one? What if your new bank doesn't issue statements before closing and you need to have recent statements, but you have a lapse in statements because of your timing. It's just these are things that happen. Another one that we talked about sort of tied in is the applying for new credit. And where that happens is people will go get appliances, furniture, and they have all the best intentions that they're not going to use. They have the money to deal with it or whatever, and then they get hit with that. Oh, well you can save 10% or there's 0% interest. Buy your furniture. Do any of that stuff after you close. Doing that before or during is not a good move.

Tom Whalen:

I would've never thought that any of this would be a problem.

Jay Day:

Yeah. Another common thing is don't close any of your credit card accounts in the process because, so how this impacts things. Let's say that you had four credit cards and you owed nothing on two of them. And people were like, well, I just don't even need to have this credit. It's not necessary. That impacts your credit score because your credit score is driven based on how much available credit you have versus how much usage there is. So let's say you had, I'll make this very simple. Let's say you had a card that you were using and you had a $5,000 limit. You were using 2,500, and then you had two cards with zero, and then you had another card. You had $5,000 limit and you only use the a hundred bucks on it. If you eliminate those two cards and you do the math, your percentage goes up, which means your credit score is going to go down. Where if the two cards you had that didn't have any balance on them were five grand, that's 5,000. The second one's 10,000, the third one was 3,000. And so you're having all of this, you've got 5, 10, $15,000 that's open and you close 10 of it. All of a sudden, your percentage of available credit versus your usage changes dramatically. Does that make sense?

Tom Whalen:

Yeah, it does make sense. And it's giving me (inaudible) here a little bit. It really is bothering me.

Jay Day:

Yeah, and discuss any change.

Tom Whalen:

The thing is, you would think closing out credit cards is a frugal the right thing to do.

Jay Day:

And like I said, that's why I'm like, these are the most common mistakes that we run into. Or people will do things and they don't tell their lender what they're doing before they do them. Ask, say, hey, I'm thinking about doing this. Hey, my kid needs me to be able to co-sign on a car. What is that going to do? I have this situation, that situation. And not everybody is going to be denied because it all depends on how tight your numbers are. But this can throw a monkey wrench into things and it can impact all types of things during the process. So it is extremely important to stay in communication with your agent, your lender, and make sure they know what you're thinking about doing before you do it. Not after, because you can't undo certain things. And the same thing, sometimes people will be like, oh, going to go, I'm not going to buy a car. I'm just going to get a lease. Well, guess what? It's still a monthly payment. I mean, they all tie in to having extra debt, which can impact your debt to income. It can impact how much you can afford because it's not like they look at it and say, you can use a hundred percent of your income on this. There's a percentage because they know you have a certain percentage for gas, for living expenses, for groceries. You put all those pieces together and if anytime you throw that ratio off, you can impact your ability to what you can purchase and possibly not even have an approval. So if you have any questions on this, you can always reach out to us. We can connect you with Joel, our lender, or we can talk to you ourselves and give you a little bit of an idea. But those are the big dues, the big avoiders of things that we see commonly happen that can blow a deal up in the middle. You ready for the home of the week?

Tom Whalen:

Give it to me.

Jay Day:

Alright. 4024 Lynn Burke Road in Monrovia, Maryland. This one just hit the market being offered at 685. Important thing with this one, before I get into the house details, we are having an open house this Saturday the 20th and Sunday the 21st from 1:00 PM to 3:00 PM. So if you like what you're hearing, stop by. This is a great home, three bedroom, open concept living area. There's cathedral ceilings, gleaming Argentinian oak flooring. There's a stone surround gas fireplace, a rear deck, a gourmet kitchen, oversized island, breakfast bar, granite counters, stainless steel appliances, gas cooktop, mud room, roman shower, a laundry room with built-in cabinetry. Two of the bathrooms have been remodeled in 2008. There's a finished lower level. In the lower level. There's a family room that has a wood-burning fireplace, the rear lawn backs to mature trees. There's a fenced in portion, which is great for your pets and oversized two car garage, large storage shed. And obviously with being in Monrovia, it's close proximity to highway, shopping and dining. If you go to wfre.com, look up Tom and Jay's real estate podcast. You'll be able to see photos. If you like what you see, you can stop into the open house or you can click right there online and schedule a private tour.

Tom Whalen:

I'm Tom.

Jay Day:

I'm Jay.

Tom Whalen:
of Jay Day and the Day Home Team at LPT Realty Weekly Real Estate Podcast. Thank you for listening and tell your friends all about it.

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