Use a Smart Strategy
This “Step One” concept actually came to me after trying to buy a mini-van at a car dealership.
With good intentions, my wife and I brought our toddler into a Ford dealership to buy a (dreaded) mini-van for our growing family. But after 2 1/2 hours of car dealership bull sh t crap, we walked out the door with a crying child (hunger pains) and no car. So, where did they go wrong?
A valuable real estate lesson
It may seem obvious to me, but most prospective real estate buyers who I meet with over coffee are pleasantly surprised in the first fifteen minutes because I cover costs or expenses. Back to the guys at the dealership, they could not answer my questions about costs (something about smoke-in-mirrors) that killed their sale.
Covering an estimated HUD-1 Settlement Statement makes sense because it will demonstrate all of the expenses, show the down payment amount, the cash due at closing, and a monthly payment estimate.
- Review HUD-1 Worksheet
That step may seem elementary to savvy real estate people, but these days the standard real estate apps assume you know what the heck you are doing. Right? You have probably found out that boring information some where else while they just want to show you what the WalkScore is or how the elementary school ranked.
Picture, for a moment, your ideal scenario
If you are just starting the process of buying a home, knowing the end number is going to help you forty five days from now when you go to closing, or next week when you are putting together an offer on your dream home in Vienna.
Let’s look into the future for a minute: You found the house and beat out five other offers (because you are from Milwaukee too) and now the Settlement is on Thursday. The 20% down payment is in your brokerage account or your Orange Account, and you contact them about getting the $134,000 that you need to close.
“Sorry Mr. Starbuck, your account has limits and we can only send you $100,000 at a time.”
or
“Sorry Mr. Starbuck, when you asked for the proceeds we mailed you a check. You should have it in 10 days.”
or
“Sorry Mr. Starbuck, your account hasn’t been set up to wire your proceeds.”
Although it must be sounding repetitive, but your first step has to be getting an understanding of the costs involved in your real estate contract. Once you know that, then you must control how you will get the needed funds to the Settlement on the day of closing. In Virginia especially, where I work, in order to get the keys to your new house, you are going to need to bring money to the closing table… one way or another.
The funds you are using for a down payment can’t just appear out of thin air. It is okay if Mom or Dad, Aunt Sue or the Starbuck Family Trust are providing the funds, simply understand that they need to be documented.
Transparency is essential in mortgage approvals these days. If any sum outside normal activity is going to hit your account, have it wired in rather than depositing a check. Wiring is very transparent unless it is coming in from an off-shore account (you know what I mean).
In the end, it all comes down to the the numbers. In my opinion, Step One needs to be a review of those numbers which will make it all happen.
