April 16, 2024 • 12 mins
Welcome back to another informative episode of the Fire Your Landlord Podcast with your hosts Jesse Smith and Jerry Lutz. This time, we dive into crucial do's and don'ts while in the process of purchasing your dream home. Jerry offers practical tips to evade common potholes that prospective homeowners often fall into, from applying for new credit to transferring money between bank accounts.
When preparing to become a homeowner, your financial habits take center stage. Jerry emphatically advises against applying for new credit, co-signing for others or damaging your credit score by maxing out your credit cards. He also brings awareness to the pitfalls of transferring large sums between accounts and making significant career changes during the mortgage application process.
Jesse takes over from Jerry to stress the importance of maintaining timely payments, safeguarding your credit scores and limiting new inquiries. Important tips are shared on why changes in employment during the mortgage application process can create unnecessary complications and delays.
To ensure a smooth home purchase journey, Jesse Smith highly recommends keeping your loan officer informed about any vacation plans, as these may impact your financial state and hence the mortgage application. Furthermore, large sums of money need to be deposited in the bank in order to create a clear, traceable path.
Equipped with these tips from Jesse and Jerry, you are better prepared for your home-buying journey. For further consultation or any questions, feel free to reach out to the Fire the Landlord contact number at (513) 655-3473. Jesse Smith and the Fire Your Landlord Podcast are here to make the home-purchasing process easier for you.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome back to the Fire Your Landlord podcast. I'm Jesse Smith and I'm here with Jerry Lutz.
This podcast, we want to touch on the do's and don'ts when you're trying to purchase a home.
So, Jerry, go ahead and give a few tips of the don'ts.
All right. So, you've made the decision to buy the home. Now we're in the process.
We've got you pre-qualified of what you can afford. So the things that you want
(00:25):
to avoid from here on out until you've closed on your home is,
A, don't apply for any new credit.
That means no going to the store and saving 10% because you open up a new credit card. Don't do it.
Don't co-sign for anyone else. So don't co-sign for your kids.
(00:45):
Don't co-sign for your brothers or your sisters or anyone.
This means don't get on a card with somebody. Don't buy an automobile with somebody and co-sign.
You don't want to do that. And especially don't do a mortgage with somebody else as well.
And the other thing you want to avoid is you want to pay down your credit card debt.
(01:07):
You don't want to max it out. So one of the things that credit card,
you know, your score is dependent on is the availability of credit and the amount
of debt that you have to your credit availability. availability.
So for example, if you have a thousand dollar credit card, you don't want to
have a thousand that's got a thousand dollar limit.
(01:27):
You don't want to have a thousand dollar balance. You want to keep that balance
somewhere around 200 to 250 at the max.
If you got a little extra money, you might want to pay those down just a little bit.
Uh, but now that you've been qualified, you just want to maintain everything.
You don't want it to grow. So, you know, now's of time when you need some cash,
(01:48):
you want to keep some cash in hand.
So, you know, if you're qualified and credit's okay, then don't go paying a
lot extra to those debts that you might have.
Let's hold on to the cash that we need for the closing.
And the other thing is, if you happen to have collections out there, don't touch them.
(02:09):
Don't touch the charge-offs. Don't touch the collections. We are allowed to
have a certain amount of aggregate in collections, so you don't want to touch any of that stuff.
And the other reason is you also, when you do pay those off,
they re-trigger on your credit report.
So they're going to do a new re-trigger on your credit. It can avoid,
(02:31):
it could adversely affect your score.
So you want to stay away from paying off collections or charge-offs unless the
L.O.s, the loan officers told you to do so because we got to get your egg or
get down to a certain point.
The other thing out there is transferring money between accounts.
If you start, if the lender starts seeing transfers come, come into and from
(02:55):
different accounts, you're going to have, you're going to be required to provide
proof of those accounts and show the money going back and forth.
It's just something that's going to be added to you to do it.
So the easiest thing is not, is try to avoid transferring the money between
accounts. so you don't have to have five or six bank accounts that we're looking at.
(03:17):
Next, withdrawing or deposit large sums of money. Avoid this.
If you deposit large sums of money, let's say you did one that,
I don't know, you sold a tractor and you got $1,000 for your tractor and you
do a one-time cash deposit in there.
We're going to have to track that $1,000 down. We're going to have to track
(03:38):
the tractor down. Now we're going to have to track down the person that bought
it and make sure that you have a paper trail showing everything going.
So the easiest thing to do is don't deposit the money.
That is when you can put it in the mattress and just hang on to it, but don't deposit it.
And don't withdraw a large amount of money as well.
Because when we're looking at your bank statements, we're taking that balance
(04:02):
and we're qualifying everything on those balances.
So if you're showing $10,000 in your bank account, definitely don't take $5,000
out and do something with it.
Because now when I rerun your automated underwriting, now all of a sudden I don't have the $10,000.
(04:22):
It can affect what the computer was determining for reserves and that kind of stuff.
So you could possibly, you know, hinder your purchase by doing that.
Don't make career moves. So don't change jobs during this process.
The only time that I would say that would be that you want to do it is if you
(04:46):
got laid off and you went right into a next job.
But you want to try to avoid it at all possible because it will delay the financing of the mortgage.
We'll have to make sure we got pay stubs from your new employer.
And don't have anyone else pay for things that are related to the mortgage or
to the purchase of the home, i.e.
(05:09):
The appraisal fee or application fee, the full house inspection.
You want to make sure that you paper trail that where you pay for it out of your own funds,
especially if we were using a down payment assistance program where they require
you to have so much of your own money the end of the deal, these things count.
(05:30):
So the full house inspection, we count your homeowner's insurance counts if you pay that upfront.
So you want to make sure that you pay those out of your own.
If somebody else pays it for you, then we're going to have to have gift letters
and those kinds of things for the money that they paid.
So those are some of the things to avoid out there.
(05:51):
So So Jesse, why don't you take us over to the dues of the process when you're
trying to get a new home loan? Sure. Thanks, Jerry.
You want to stay current on your accounts. So if you have multiple credit cards,
auto loan, it's not the time to, if you're current, you made 10 payments and
(06:11):
they're always been on time.
It's not a time for you to make your 11th payment late because if it goes to
a certain an amount of time.
Like, you know, if you have a 30 day late, that can halt a deal because,
you know, depends on your credit score.
If you, you know, you got a 30 day late or God forbid you get a 60 day late,
that could be something that you might have to halt a loan for the purchase
(06:33):
for over a year. So you don't want that on there.
So make sure if you're paying on time, keep paying on time, no matter what,
just keep on point on that because that could be something that could a really hard deal.
I've seen it before. You don't want to be in that position because it's not
a fun position for the customer.
Also, you know, number two, you know, continue. I said I actually,
(06:54):
you know, lay those both all together, you know, continue paying credit as normal.
So I'm not even going to get into that because I kind of run all sentence both
of those together for everybody.
And then just like Jerry said, you don't want to change, you know,
employers during this process because it's going to make it a lot, a lot harder.
You know, you want to keep the same employment Because, you know,
if you change a new job now, you know, you have to we had to get it. We got to get a stub.
(07:18):
So who knows? You know, normally you get paid once. You know,
maybe it's once a week. Maybe you get paid twice a week.
But sometimes you're on you're behind. So you're in the hole.
So if you have to, you know, you need a check.
And you normally get paid on every other Friday, you start a new job,
you might not get that check for a month.
And then that's going to hold this closing up. The seller can get antsy.
(07:39):
They might not want to wait through this process. So if you can,
unless you get fired, you want to hold on to that job no matter what.
And then some people, they may go from being W-2 to going to being self-employed.
And that's a whole nother can of worms that you don't want to open up.
So you want want to stay with that current job or your current income until you sign for your key.
(08:01):
So until that happens, stay consistent with that job. And as soon as you sign,
you can change and do what you want.
But we're going to recommend you staying with that current job,
even if they're getting on your nerves.
So do that because it's going to make it easier for us to help you and the banks to help you as well.
So the next is protect your credit scores and limit your new inquiries.
(08:21):
You know so you know if
you have great credit that's great if your credit's on
the fence that's great as well but you don't want to
open up a new credit card you don't want to go get a
new you know new car unless your car is broken down i would highly recommend
you do not get a car i've been in that situation where i've had a customer buy
(08:43):
a new car before they close you know what happened they couldn't close so you
want to wait and just wait to that process until you sign that paper And then you can go do that.
So hopefully people aren't in that. Don't get in that situation.
But if you go to Target and they're saying, hey, you're going to just like Jerry
said, you're going to go to that store and they're saying, hey,
you're going to say 15 percent to open up that new car. Tell them no.
(09:06):
Maybe in a couple of weeks you can revisit that after you get your home.
You'll be happy. And it's worth going back in. Maybe he's paying a little bit
more at that at that time, at that current time.
But you don't want to go to Walmart and get a new car. You don't want to go
to Dick's Sporting Goods and then when you're trying to buy your kids some stuff
and they're like, hey, you're going to save an extra 20%.
(09:26):
Pay that full price. Because if you open up that card, it's going to be another
dicey thing and more legwork for you and the mortgage loan officer.
So another thing, notify the mortgage loan officer if you're going on vacation.
And the main reason why you want to do that, you might say, hey,
that mortgage loan officer is prying.
No, he or she is trying to protect your best interests.
(09:49):
That's what we're going to do. Because if you're going on vacation,
what you're going to do, You're going to spend money and essentially you're
going to need money for down payment and that we already have that accounted for.
If you're going to go, say you go to Florida, a lot of people like to go to
Florida, especially in Ohio area when it's cold.
You're probably going to spend, even if you got everything paid for,
(10:09):
you're going to probably spend a thousand dollars or more just for travel,
having good time, you know, going places.
Says, you got to tell that person so we can have that accounted for so we don't
short you when it's time to come to the closing table.
Because vacations are expensive. Gas is expensive.
Unless you have a Tesla, I'm not promoting Teslas on here unless you guys want
(10:32):
to promote the podcast, but you have a Tesla that you're not paying that much gas for.
I mean, I just filled it up the other day and I paid $54.
So that adds up. If you're driving to Florida, you're probably you're going to pay over,
you know, under 150 bucks for just for gas. So that's, that's going to come
in somehow, you know, so, you know, to let us know, so we can account for that.
(10:53):
And if you got enough where it doesn't matter, still let them know,
because we want to make sure we don't want to get hit with any curve balls when
we're trying to go to the closing table.
So last but not least deposit income into your bank accounts instead of cashing checks.
So with that is, you know, So cash, depositing the money into your,
not, not, okay, so take a step back.
(11:15):
You don't want money just to come from your mattress. But if somebody is paying
you, put that money in there so we can account for it.
And you can use that for as far as your down payment. You don't want to just
leave that check, you know, at your house because, you know,
now say if I've had customers where they might have, they might be short $500.
So if that money is not in the system, we can't use it. So we can't just have
(11:38):
money just come from under the porch, under the mattress. We need it to be in circulation.
And if you have money that you can prove that you've earned and it's not just
coin flip of where the money's come from,
make sure it's in circulation because every penny counts and you don't want
your deal to be delayed or even denied because you don't have enough money to
(11:59):
come to the closing table.
So these are some of the tips that we have that we're giving.
And if you have questions feel free to reach out to
the fire the landlord contact number and that is
513-655-3473 once
again that's 513-655-3473 and we'll definitely help you guys with this process
(12:20):
and you know help you because you know you don't know what you don't know and
we're here to help you know what you don't know so that's that's our expertise
i'm jesse smith and we're signing out.
Welcome back to the Fire Your Landlord podcast. I'm Jesse Smith and I'm here with Jerry Lutz.
This podcast, we want to touch on the do's and don'ts when you're trying to purchase a home.
So, Jerry, go ahead and give a few tips of the don'ts.
All right. So, you've made the decision to buy the home. Now we're in the process.
We've got you pre-qualified of what you can afford. So the things that you want
(00:25):
to avoid from here on out until you've closed on your home is,
A, don't apply for any new credit.
That means no going to the store and saving 10% because you open up a new credit card. Don't do it.
Don't co-sign for anyone else. So don't co-sign for your kids.
(00:45):
Don't co-sign for your brothers or your sisters or anyone.
This means don't get on a card with somebody. Don't buy an automobile with somebody and co-sign.
You don't want to do that. And especially don't do a mortgage with somebody else as well.
And the other thing you want to avoid is you want to pay down your credit card debt.
(01:07):
You don't want to max it out. So one of the things that credit card,
you know, your score is dependent on is the availability of credit and the amount
of debt that you have to your credit availability. availability.
So for example, if you have a thousand dollar credit card, you don't want to
have a thousand that's got a thousand dollar limit.
(01:27):
You don't want to have a thousand dollar balance. You want to keep that balance
somewhere around 200 to 250 at the max.
If you got a little extra money, you might want to pay those down just a little bit.
Uh, but now that you've been qualified, you just want to maintain everything.
You don't want it to grow. So, you know, now's of time when you need some cash,
(01:48):
you want to keep some cash in hand.
So, you know, if you're qualified and credit's okay, then don't go paying a
lot extra to those debts that you might have.
Let's hold on to the cash that we need for the closing.
And the other thing is, if you happen to have collections out there, don't touch them.
(02:09):
Don't touch the charge-offs. Don't touch the collections. We are allowed to
have a certain amount of aggregate in collections, so you don't want to touch any of that stuff.
And the other reason is you also, when you do pay those off,
they re-trigger on your credit report.
So they're going to do a new re-trigger on your credit. It can avoid,
(02:31):
it could adversely affect your score.
So you want to stay away from paying off collections or charge-offs unless the
L.O.s, the loan officers told you to do so because we got to get your egg or
get down to a certain point.
The other thing out there is transferring money between accounts.
If you start, if the lender starts seeing transfers come, come into and from
(02:55):
different accounts, you're going to have, you're going to be required to provide
proof of those accounts and show the money going back and forth.
It's just something that's going to be added to you to do it.
So the easiest thing is not, is try to avoid transferring the money between
accounts. so you don't have to have five or six bank accounts that we're looking at.
(03:17):
Next, withdrawing or deposit large sums of money. Avoid this.
If you deposit large sums of money, let's say you did one that,
I don't know, you sold a tractor and you got $1,000 for your tractor and you
do a one-time cash deposit in there.
We're going to have to track that $1,000 down. We're going to have to track
(03:38):
the tractor down. Now we're going to have to track down the person that bought
it and make sure that you have a paper trail showing everything going.
So the easiest thing to do is don't deposit the money.
That is when you can put it in the mattress and just hang on to it, but don't deposit it.
And don't withdraw a large amount of money as well.
Because when we're looking at your bank statements, we're taking that balance
(04:02):
and we're qualifying everything on those balances.
So if you're showing $10,000 in your bank account, definitely don't take $5,000
out and do something with it.
Because now when I rerun your automated underwriting, now all of a sudden I don't have the $10,000.
(04:22):
It can affect what the computer was determining for reserves and that kind of stuff.
So you could possibly, you know, hinder your purchase by doing that.
Don't make career moves. So don't change jobs during this process.
The only time that I would say that would be that you want to do it is if you
(04:46):
got laid off and you went right into a next job.
But you want to try to avoid it at all possible because it will delay the financing of the mortgage.
We'll have to make sure we got pay stubs from your new employer.
And don't have anyone else pay for things that are related to the mortgage or
to the purchase of the home, i.e.
(05:09):
The appraisal fee or application fee, the full house inspection.
You want to make sure that you paper trail that where you pay for it out of your own funds,
especially if we were using a down payment assistance program where they require
you to have so much of your own money the end of the deal, these things count.
(05:30):
So the full house inspection, we count your homeowner's insurance counts if you pay that upfront.
So you want to make sure that you pay those out of your own.
If somebody else pays it for you, then we're going to have to have gift letters
and those kinds of things for the money that they paid.
So those are some of the things to avoid out there.
(05:51):
So So Jesse, why don't you take us over to the dues of the process when you're
trying to get a new home loan? Sure. Thanks, Jerry.
You want to stay current on your accounts. So if you have multiple credit cards,
auto loan, it's not the time to, if you're current, you made 10 payments and
(06:11):
they're always been on time.
It's not a time for you to make your 11th payment late because if it goes to
a certain an amount of time.
Like, you know, if you have a 30 day late, that can halt a deal because,
you know, depends on your credit score.
If you, you know, you got a 30 day late or God forbid you get a 60 day late,
that could be something that you might have to halt a loan for the purchase
(06:33):
for over a year. So you don't want that on there.
So make sure if you're paying on time, keep paying on time, no matter what,
just keep on point on that because that could be something that could a really hard deal.
I've seen it before. You don't want to be in that position because it's not
a fun position for the customer.
Also, you know, number two, you know, continue. I said I actually,
(06:54):
you know, lay those both all together, you know, continue paying credit as normal.
So I'm not even going to get into that because I kind of run all sentence both
of those together for everybody.
And then just like Jerry said, you don't want to change, you know,
employers during this process because it's going to make it a lot, a lot harder.
You know, you want to keep the same employment Because, you know,
if you change a new job now, you know, you have to we had to get it. We got to get a stub.
(07:18):
So who knows? You know, normally you get paid once. You know,
maybe it's once a week. Maybe you get paid twice a week.
But sometimes you're on you're behind. So you're in the hole.
So if you have to, you know, you need a check.
And you normally get paid on every other Friday, you start a new job,
you might not get that check for a month.
And then that's going to hold this closing up. The seller can get antsy.
(07:39):
They might not want to wait through this process. So if you can,
unless you get fired, you want to hold on to that job no matter what.
And then some people, they may go from being W-2 to going to being self-employed.
And that's a whole nother can of worms that you don't want to open up.
So you want want to stay with that current job or your current income until you sign for your key.
(08:01):
So until that happens, stay consistent with that job. And as soon as you sign,
you can change and do what you want.
But we're going to recommend you staying with that current job,
even if they're getting on your nerves.
So do that because it's going to make it easier for us to help you and the banks to help you as well.
So the next is protect your credit scores and limit your new inquiries.
(08:21):
You know so you know if
you have great credit that's great if your credit's on
the fence that's great as well but you don't want to
open up a new credit card you don't want to go get a
new you know new car unless your car is broken down i would highly recommend
you do not get a car i've been in that situation where i've had a customer buy
(08:43):
a new car before they close you know what happened they couldn't close so you
want to wait and just wait to that process until you sign that paper And then you can go do that.
So hopefully people aren't in that. Don't get in that situation.
But if you go to Target and they're saying, hey, you're going to just like Jerry
said, you're going to go to that store and they're saying, hey,
you're going to say 15 percent to open up that new car. Tell them no.
(09:06):
Maybe in a couple of weeks you can revisit that after you get your home.
You'll be happy. And it's worth going back in. Maybe he's paying a little bit
more at that at that time, at that current time.
But you don't want to go to Walmart and get a new car. You don't want to go
to Dick's Sporting Goods and then when you're trying to buy your kids some stuff
and they're like, hey, you're going to save an extra 20%.
(09:26):
Pay that full price. Because if you open up that card, it's going to be another
dicey thing and more legwork for you and the mortgage loan officer.
So another thing, notify the mortgage loan officer if you're going on vacation.
And the main reason why you want to do that, you might say, hey,
that mortgage loan officer is prying.
No, he or she is trying to protect your best interests.
(09:49):
That's what we're going to do. Because if you're going on vacation,
what you're going to do, You're going to spend money and essentially you're
going to need money for down payment and that we already have that accounted for.
If you're going to go, say you go to Florida, a lot of people like to go to
Florida, especially in Ohio area when it's cold.
You're probably going to spend, even if you got everything paid for,
(10:09):
you're going to probably spend a thousand dollars or more just for travel,
having good time, you know, going places.
Says, you got to tell that person so we can have that accounted for so we don't
short you when it's time to come to the closing table.
Because vacations are expensive. Gas is expensive.
Unless you have a Tesla, I'm not promoting Teslas on here unless you guys want
(10:32):
to promote the podcast, but you have a Tesla that you're not paying that much gas for.
I mean, I just filled it up the other day and I paid $54.
So that adds up. If you're driving to Florida, you're probably you're going to pay over,
you know, under 150 bucks for just for gas. So that's, that's going to come
in somehow, you know, so, you know, to let us know, so we can account for that.
(10:53):
And if you got enough where it doesn't matter, still let them know,
because we want to make sure we don't want to get hit with any curve balls when
we're trying to go to the closing table.
So last but not least deposit income into your bank accounts instead of cashing checks.
So with that is, you know, So cash, depositing the money into your,
not, not, okay, so take a step back.
(11:15):
You don't want money just to come from your mattress. But if somebody is paying
you, put that money in there so we can account for it.
And you can use that for as far as your down payment. You don't want to just
leave that check, you know, at your house because, you know,
now say if I've had customers where they might have, they might be short $500.
So if that money is not in the system, we can't use it. So we can't just have
(11:38):
money just come from under the porch, under the mattress. We need it to be in circulation.
And if you have money that you can prove that you've earned and it's not just
coin flip of where the money's come from,
make sure it's in circulation because every penny counts and you don't want
your deal to be delayed or even denied because you don't have enough money to
(11:59):
come to the closing table.
So these are some of the tips that we have that we're giving.
And if you have questions feel free to reach out to
the fire the landlord contact number and that is
513-655-3473 once
again that's 513-655-3473 and we'll definitely help you guys with this process
(12:20):
and you know help you because you know you don't know what you don't know and
we're here to help you know what you don't know so that's that's our expertise
i'm jesse smith and we're signing out.
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