10 Ways to Lose Your Home – Part 1

Few home buyers stop to think that they could lose their home. But mistakes happen. The reasons sellers decide to sell are based on the mistakes they made when they purchased.  Doing your research and being well prepared can help you not make costly and life altering mistakes that will take years to recoup from.

Attending Seminars

Start by calling that toll-free phone number to make a reservation. Then sit through a three-hour sales pitch for books, tapes, CDs and specially discounted services hawked by seminar gurus who most likely never bought or sold a piece of real estate in their lives but are getting rich off the backs of suckers. Er, I mean honest, information seeking consumers. Armed with trade secrets, then venture forth into the world of real estate, making sure you regularly point out how the “pros do it” to your real estate agent, who, undoubtedly, will be forever grateful to receive such sage advice. Make dozens of lowball offers that get rejected until you find a seller who will carry all the financing at 18% interest with a 3-year balloon payment.

Choosing Bad Agents

Start by believing the premise that all real estate agents are the same because they all hold a real estate license. Do not interview your agent because you don’t want to offend by asking hard questions or trying to figure out the agent’s answers. Hire the cheapest and most eager agent you can find, regardless of experience, because that agent will work harder for you. In fact, ask your newly licensed brother-in-law to represent you. Refuse to sign a buyer’s broker agreement.

Having No Savings or Spending It

Put every cent you can scrape together into a down payment for your new home. Beg or borrow money from relatives to pay your closing costs, which will barely let you squeak by an underwriter’s scrutiny, but at least you have equity walking into the deal. If you’re short on funds, tell yourself that you’ll make it up out of next week’s paycheck and make a cash withdrawal on a major credit card. Plan on charging all repairs and future maintenance to that credit card as well. Make every effort to clean out all sources of available cash, dumping every dime into the purchase of your new home. In fact, why not cash in your retirement accounts, too, because retirement is a long ways off.

Refusing Professional Advice

Realize that regardless of what your agent or mortgage broker tells you, professional sales people are only interested in closing the deal. They want your money into their pocket as fast as they can get it and nobody cares about what happens to you, except you. Which makes you an authority. What you do not know, you can ask Uncle Joe to explain, since he owns a home and you do not. Don’t bother looking up information on the Internet, reading real estate books or asking for a second opinion as all of that is a waste of time. Whatever you do, do not, under any circumstances, ask a lawyer or an accountant for advice. If you receive professional advice, disregard it and do what you think is best.

Choosing the Wrong Financing

The lower your monthly payment, the more money you will have leftover every month to spend on other things. Besides, appreciation is the only way to build equity in a home; you do not need to pay down the principal balance of your loan. Make sure you shop for the lowest interest rate you can find, even if it means the rate will adjust later on. Don’t pay any attention to a Good Faith Estimate — it’s just jargon. If you don’t understand the terms of your loan, shrug it off. You know there is no reason to be concerned with silly terms such as indexes, margins, caps or negative amortization. Because you have a low interest rate, a low monthly payment, and you feel confident that whatever happens later, you can handle.

For more, see Part 2 of this Blog

10 Ways to Lose Your Home – Part 2

Picking the Wrong Neighborhood

The three most important words in real estate: location, location, location, are a joke to you, but you never got the punch line. Besides, driving through a neighborhood will tell you everything you need to know about an area. There is no point in asking the police department about crime statistics or talking to neighbors before you buy. To you, living next to a grocery store means you can pick up a carton of milk without walking very far. Even though a few boarded-up homes on the block sport rotting mattresses in the front yards, it doesn’t affect your market value. You can instantly recognize a good buy when you find it, especially if it’s priced thousands less than homes in neighborhoods you’ve considered but cannot afford.

Purchasing the Most Expensive Home

The most important factor to consider when buying a home is to make sure your home is the largest and most expensive home you are pre-qualified to purchase. You will derive great pleasure in bragging about your elaborate new home to friends and family and want to make sure your home is impressive. There is no such word as compromise in your search for a home. If you need three bedrooms, a five-bedroom is better, even if the home that fits your needs costs less. The more bells and whistles it has, the more you will love it. As far as you’re concerned, you can’t be stretched too thin if every single design element of the home is perfect for your tastes, and you’re willing to reach higher than common sense dictates to get it.

Passing on Proper Home Inspections

Everybody knows that home inspections are a waste of money and time. There is no known default in a home that can’t be spotted with your own eyes, and qualified home inspectors aren’t going to conduct any visual inspections that you can’t do on your own. If a home has four walls, a roof and somebody is willing to occupy it, you can fix any minor problems that surface later on. Besides, suing the seller and everybody involved in the transaction after it closes is always an attractive alternative. You would prefer to save the money you would throw away on a home inspection and instead buy a new barbecue grill. It doesn’t matter that the interior walls are crumbling because a fresh coat of paint works wonders.

Altering Financials Before Closing

Now that you’ve finally taken that leap, written an offer that was accepted by the seller, you’re still in the buying mode. While waiting for loan funding, you may decide it’s a good idea to buy a new car to match that new home. Better yet, you may as well buy new living room furniture; oh, and a big screen TV would fit on the wall over the fireplace like a glove. In fact, there’s a sale on washer and dryers, and you’ve always wanted a new fangled front loader. Your excellent credit report affords you the opportunity to buy whatever you desire and, besides, there are no payments due for a year. It’s like getting a new car and home furnishings for free. After all, more debt shouldn’t affect the funding of a mortgage.

Plunging Into Debt

Now that you’re a homeowner, you’re blown away by all the incentives arriving in the mail offering great deals on a home equity loan. Why, you can pull out all your equity and use this new-found money to buy all those necessities you’ve been denying yourself and your family. A vacation in Hawaii next December sounds wonderful to you. So does buying patio furniture, and maybe new decking or a spa for the back yard. While you’re at it, maybe you should remodel the kitchen, too, and put in granite counters, perhaps new appliances. You can afford it. You will never lose your job or need money for a medical emergency; times are good right now!

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