10 Home Buying Mistakes You Can't Afford

1.Don't choose the wrong mortgage: Home loans may no longer be the lifetime obligations they used to be but still -- you don't want to be saddled for even a short period of time with the wrong one. Investigate all of your options, then lay your choices side-by-side and do the math, making sure to compare worst-case scenarios. Be sure to look at initial interest rates, future interest rates and payments (if different), and the possibility, though now rare, of prepayment penalties.

2. Don't confuse "pre-approved" and "pre-qualified" with a loan commitment: When you are "pre-qualified," the lender is making an educated guess about how much you can borrow based on information you've provided. When you are "pre-approved," the lender has verified everything you've provided and is offering to lend you up to a given amount at current interest rates -- under certain conditions. It's much better to be pre-approved when shopping for a home because both you, your real estate agent and the seller know what you can afford. Whether pre-qualified or pre-approved, final clearance and a check at closing -- a loan commitment -- are subject to an appraisal satisfactory to the lender, good title, a last-minute credit check, and other verifications. When meeting with lenders, always ask what additional steps will be required to obtain a loan.

3. Don't have too much credit: Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit you have available to you as they do on timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. Postpone any big-ticket purchases until after you buy your house.

4. Don't lie on your loan application: Exaggerating your income on a mortgage application or putting down other untruths can be a federal offense. Lenders rarely prosecute liars but if they find out later, they can call your loan due and payable. Don't ever sign your name to a loan application that is not completely filled out, either. Loan officers have been known to stretch the truth to get a client approved, but it's the borrowers who end up paying the price, often in the form of monthly loan payments they can't afford.

5. Don't hide if you can't make your payments: The worst thing you can do is ignore phone calls and letters from your lender when you are behind on your payments. Lenders have many options at their disposal to help keep borrowers from losing their homes to foreclosure. But they can't do anything for you unless they can talk to you about your difficulties. Lenders are the enemy only if you give them no other choice.

6. Don't skip a home inspection: Failing to make your purchase contingent on a satisfactory home inspection could be a costly mistake. Independent home inspectors examine houses from stem to stern. They'll be able to tell you whether the roof or basement leaks, whether the mechanical systems are in good shape and how long the appliances should last. They can't report on things they can't see, but at least their trained eyes are better than yours. So don't pass just to save $300-$400; that's money well spent.

7. Don't hire just any agent to sell your house: All real estate agents are not the same. You want to look for those who specialize in your neighborhood and are top producers. Ask your candidates how they plan to market your house, what you can do to make the place more attractive to prospects and how much you should ask. If you don't like any of the answers, look elsewhere.

8. Don't fail to check out a remodeler: Never, ever hire a contractor who knocks on your door or says his prices are good for only a few days. Reputable remodelers don't solicit door-to-door, and they don't cut prices just because they happen to be in your neighborhood. Check out a potential contractor thoroughly by calling several of his past clients, your local better business bureau, his bankers and suppliers, and your local consumer affairs agency.

9. Don't pay too much upfront: If a contractor asks for more than a third of the contract price as a downpayment, chances are something's wrong. At worst, he's a scam artist who has no intention of returning after he cashes your check. At best, he's undercapitalized and can't afford to purchase materials on his own. Or, in between, he could be using your money to pay workers on another job. Never give a contractor cash, either.

10. Don't burn your mortgage: It's a wonderful feeling when you make your last house payment. After all, the place is now yours, all yours. Many people celebrate by holding a mortgage burning party. But they torch the original document. Don't. Make a copy and burn that instead. Keep all your loan docs in a safe place.

10 Spring Maintenance Tips for Home Owners

After a long, dark winter, spring's bright sun and warm winds are, well, a breath of fresh air. The only downside? All that sunshine spotlights your leaf-filled gutters, cracked sidewalks and the dead plants in last year's flower beds. Dwight Barnett, a certified master inspector with the American Society of Home Inspectors, shared this checklist to help you target the areas that need maintenance so you can get your chores done quickly, leaving you time to go outside and play in the sunshine.

1. Check for loose or leaky gutters. Improper drainage can lead to water in the basement or crawl space. Make sure downspouts drain away from the foundation and are clear and free of debris.

2. Low areas in the yard or next to the foundation should be filled with compacted soil. Spring rains can cause yard flooding, which can lead to foundation flooding and damage. Also, when water pools in these low areas in summer, it creates a breeding ground for insects.

3. Use a screwdriver to probe the wood trim around windows, doors, railings and decks. Make repairs now before the spring rains do more damage to the exposed wood.

4. From the ground, examine roof shingles to see if any were lost or damaged during winter. If your home has an older roof covering, you may want to start a budget for replacement. The summer sun can really damage roof shingles. Shingles that are cracked, buckled or loose or are missing granules need to be replaced. Flashing around plumbing vents, skylights and chimneys need to be checked and repaired by a qualified roofer.

5. Examine the exterior of the chimney for signs of damage. Have the flue cleaned and inspected by a certified chimney sweep.

6. Inspect concrete slabs for signs of cracks or movement. All exterior slabs except pool decks should drain away from the home's foundation. Fill cracks with a concrete crack filler or silicone caulk. When weather permits, power-wash and then seal the concrete.

7. Remove firewood stored near the home. Firewood should be stored at least 18 inches off the ground at least 2 feet from the structure.

8. Check outside hose faucets for freeze damage. Turn the water on and place your thumb or finger over the opening. If you can stop the flow of water, it is likely the pipe inside the home is damaged and will need to be replaced. While you're at it, check the garden hose for dry rot.

9. Have a qualified heating and cooling contractor clean and service the outside unit of the air conditioning system. Clean coils operate more efficiently, and an annual service call will keep the system working at peak performance levels. Change interior filters on a regular basis.

10. Check your gas- and battery-powered lawn equipment to make sure it is ready for summer use. Clean equipment and sharp cutting blades will make yard work easier.

4 things to think about when deciding to buy or sell

Every real estate market creates its own buyer and seller personas, or profiles. When the market is slow and prices are low, it brings out 'the wheeler-dealer' and 'the lowballer,' as well as the 'paralyzed panicker' in some buyers.

But sellers aren’t immune. 

And in a warm or hot market climate, the rise in home prices makes some sellers wonder whether they should exercise the freedom of finally having some home equity and make a move, or if it's a better idea to stay put in hopes they can sell for more, next year or later.

Truth is, whether any given person should sell their home or stay put at any given time is a highly personal decision. Market dynamics should come into play, but that should be considered in the context of your personal life, career, family and financial plans.

Trying to figure out whether to sell or stay put? Here are four ways to know which decision is right for you.

1.  Sign You Should Sell: You frequently crave a neighborhood upgrade. I have known people who have liveed in “up and coming neighborhoods” for 20 years, and are still waiting for it to up-and-come. Others own homes on streets or in subdivisions they used to love that have changed dramatically because the city has been built up in a different direction, the area was rezoned, or because a school, freeway, commercial development, airport or train station was brought in. And still other home owners fall out of love with their neighborhoods because their job has moved, making their commute a pain.

In any event, if your home’s location is seriously misaligned with your life or your tastes, that fact is one you face all day, every day, for the duration of the time you live in the property. It can become a serious source of life dissatisfaction and resentment that rears its ugly head every time you make your monthly mortgage payment. As I see it, dissatisfaction with your neighborhood or a serious neighborhood-life disconnect can be a strong reason to sell and move, assuming you can make a move to a neighborhood that would better serve your life in a financially responsible way.

2.  Sign You Should Stay:  You can totally afford a new house - if you sell a kidney. A few years back, a friend of mine wrote a book called Life Would be Perfect if I Lived in That House (Vintage 2011). In it, she told how her mother was so addicted to the grass-is-greener promise of moving to a new home that she would actually take her family Open House hunting, even when they were visiting towns they had no interest in moving to! She went on to relate her inherited real estate addiction to the national trend of “moving on up,” so to speak, with financial recklessness - the trend that many believe led to the Great Recession.

There’s nothing wrong with being a real estate aficionado, but it’s important to watch to make sure grass-is-greener-at-that-house syndrome isn’t motivating you to make a financially unwise decision to sell and move. 

If you are considering selling your home and moving up, do your own financial home work. Run your own budgets, income and expense reports and other financials to understand what level of increased financial obligation, if any, your household finances can afford to take. Consider whether you might want to set up some savings, investing or debt elimination targets before making a move. Work with your financial planner, tax professional and your real estate and mortgage pros to fully understand all the financial implications, short- and long-term, of selling and moving before you put the sign up in the yard.

3.  Sign You Should Sell: Space-wise, your family is too close for comfort. (And things will get worse before they get better.) I marvel at how much stuff the smallest infant seems to need.  I once went to a baby shower that generated so many strollers, packable playpens and sheer gear that it took 2 SUVs and a station wagon to cart it all home - for a kid that ultimately weighed in at 6 pounds and some-odd ounces.

If you have very young children and you’re already tripping over each other, chances are good that their space needs will grow as they do, even after all the baby gear is gone. School-aged kids and teenagers develop their own hobbies and need space for studies and sports - and on top of that, many parents of young children can realistically anticipate moving their own parents in at some point in time.

If you’re struggling to find a space for everything (and everyone), project your space needs out five years into the future. If you think you’ll need less space in five years (e.g., because your kids will likely move out in that time frame), it might not make sense to buy a bigger home now. But if it looks like you’ll need more space before you need less, that can be a sound rationale for making a financially rational move.

4.  Sign You Should Stay:  You could fix what ails your home with relatively modest remodeling projects.  If your home is bothersome primarily because things don’t function very well or its aesthetics are out of whack with your style, you might be tempted to sell and move.  Here’s a tip-off: your “dream home” is the Open House one block over that is nearly identical to your home in location, size, architecture, bedrooms and baths, but is impeccably decorated and updated. If you find yourself in this situation, you might very well be able to resolve your issues by investing less than you would spend on the transactional costs of selling and buying another home into some small-to-medium-scale remodeling projects on your current home.

On a budget, painting, landscaping, replacing exterior trims and interior hardware and updating your kitchen appliances will likely give you the biggest boost in home love for your buck. Similarly, you can get a major enjoyment boost out of your home for very little money by bringing a handyperson in to fix all those niggling little items that make a home seem worn out, including:

• drawers that stick
• handles you have to jiggle
• drafts that need stopping up, and
• scrapes and scuffs that make a place look rundown.

That said, when you consider what you would spend on commissions and closing costs to sell one home and buy a nearly-identical new one, you might be able to justify a larger updating/upgrading budget. If you have a little more dough to spend, consider a kitchen or bath remodel, having some custom organizers built in, or putting in the wood floors or deck you’ve always wished for. You might be surprised how fast home hate can turn to love when you start pampering your property.

8 Key Areas for Safe Deck Inspection

Constructing a safe deck requires research, proper hardware, regular maintenance and oftentimes, help from a professional builder or inspector. Many Americans, however, still view adding a deck to their home as a simple, Do-it-Yourself project for Memorial Day weekend. Over the last 10 years, there have been more than 800 reported injuries and 20 deaths as a result of deck collapse. 


The ledger connection, where the deck attaches to the house, is the most common type of deck failure.

Of the 40 million decks in the United States, it’s estimated only half meet building code requirements. To promote deck safety, ASHI is teaming up with the North American Deck and Railing Association (NADRA) and Simpson Strong-Tie to encourage homeowners to make sure their decks are inspected before outdoor barbecues and parties begin. And May — NADRA’s Deck Safety Month® — is a perfect time for a deck inspection. 

There are many components to consider when inspecting a client’s deck. Checking for wood rot and large cracks is key, but you also must evaluate the structure as a whole. 

To ensure the structural safety of a deck, it should be built with a continuous load path. A continuous load path is a method of construction that creates a series of solid connections within the structure of the deck that transfers the load through its frame to the ground and adjacent support structure, commonly the house.

A continuous load path requires more than a few nails and some deck boards. There are a total of eight key areas of a deck that must be secured with connectors and fasteners to ensure that the structure can support all of the weight that’s placed on it. When inspecting a deck, you’ll want to make sure the following areas of the deck are properly fastened.

CRITICAL DECK CONNECTIONS


1. Ledger-to-Wall Framing
Correct ledger attachment is critical when a deck is attached to another structure. One of the most common causes for deck failures is ledgers that are not properly secured and pull away from the primary structure, resulting in collapse. The two most common ways to correctly attach the ledger to a structure are lag screws or machine-bolts through the ledger and into the rim joist of the supporting structure. 

2. Joist-to-Ledger 
When joists terminate into a beam or ledger, a connection is required to provide bearing. In cantilever applications, the connection also must resist uplift.

3. Beam-to-Post
At the point where a beam meets a post, it must be properly connected to the post in order to resist gravity, lateral and uplift loads. This pertains to solid sawn beams or those comprised of multiple members, whether they rest on top or are fastened to the side of the post.

4. Joist-to-Beam
At the point where the joist bears on top of a beam, there must be a connection to resist lateral and uplift forces. Blocking or framing also is required to prevent overturning of the joists.

5. Railing Post-to-Deck
The railing connection is another important connection pertaining to safety that is often overlooked. In order to provide the required load resistance at the hand rail, the post not only must be fastened to the rim joist, but also tied back into the joist framing. Machine bolts through the post and rim joist alone do not typically meet the performance requirements of the code. Instead, a mechanical connector installed into the joist with bolts through the post is needed.

 6 & 7. Stair Tread-to-Stringer and Stair-Stringer-to-Deck
Stair stringers must be properly connected to the deck, and treads properly connected to the stringers, in order to resist loads. In addition, code requirements regarding openings between stair treads and stair railing must also be met.

8. Post-to-Concrete
In order for posts to properly resist various types of loads, they must rest on and be anchored to concrete footings. Patios and pre-cast concrete piers do not qualify as proper footings for deck construction.

Posts must be correctly attached to a concrete footing in order to resist lateral and uplift loads. Unless posts are naturally decay-resistant or made from preservative-treated wood, they must be elevated off the concrete by 1 inch to help prevent decay at the end of the post due to moisture.

CORROSION

Not only should connectors in the critical areas be present and accounted for, they must all be in good condition. The issue of corrosion with metal connectors and fasteners heightened when the industry moved away from CCA to other types of preservative-treated wood. It’s important when inspecting decks made from preservative-treated wood that the proper connectors and fasteners are used. In many cases, Simpson Strong-Tie ZMAX® (G185) and hot dip galvanized (HDG) connectors and fasteners provide adequate corrosion resistance. There are parts of the country that are considered at a higher risk for corrosion, such as areas along the coast, areas exposed to chemicals, industrial zones, etc. In these cases, the use of stainless steel connectors and fasteners is recommended. Stainless steel connectors and fasteners provide the highest level of corrosion resistance. For more information about corrosion and connector coating recommendations, visit www.strongtie.com/corrosion.

Adding the right connectors and fasteners to a deck is an investment of a few hundred dollars that often will prevent a complete rebuild and keep deck owners and their families safe. Always remind your clients to regularly inspect and maintain their decks. If they’re not comfortable doing this themselves, recommend they hire you or another qualified, professional home inspector. If built and maintained properly, a deck will result in years of enjoyable and safe outdoor living.

Simpson Strong-Tie has developed a comprehensive Deck Framing Connection Guide that can help you through the process of making sure a deck is safe, secure and code-compliant. You can download the guide or request a copy atwww.strongtie.com/safedeck.

Top 10 things you need to know when buying a home.

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.

Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

Why do I need a home inspection?

The purchase of a home is one of the biggest investments people will make in their lifetimes. But it is also among the greatest sources of anxiety. A home inspection helps ensure home buyers of the quality of their investment by making them aware of its condition and alerting them to any concerns. This can serve to relieve stress, increase confidence and even reduce the threat of legal action in the future.

Some of the benefits of a home inspection are:

Knowledge: Understanding exactly what you're buying - old or new

Peace of mind: Helps in making a sound buying decision

Savings: The home inspection reveals the need for repairs or replacements before you buy

Fewer surprises: The home inspection limits the number of problems you may discover after you move in

Education: A good home inspection also gives you invaluable details about your new home in addition to information about the condition of the property. You'll learn where the main shutoff valves to the utilities are located, how the house operates and more!

How do I find a good home inspector?

Not all inspection companies are alike, and selecting the wrong company could cost you thousands of dollars in repair and replacement costs. Consider the following when shopping for home inspection companies.

Experience: How much experience do the inspectors have and how long have they have been in the business? The best home inspectors have been in business for years and have seen thousands of homes.

Home Inspection Training: Have the inspectors gone through any extensive home inspection training? In many states inspectors can simply call themselves home inspectors without any training or licensing.

Association Membership: Is the inspector a member of a professional home inspection organization? 

Companies that are affiliated with professional organizations are serious about what they do, and know about all the new developments in their fields. Some well-known trade associations are: American Society of Home Inspectors (ASHI) and National Association of Home Inspectors (NAHI). Inspectors in your area can be located through these associations.

Liability Insurance: Does the inspector carry Professional Liability Insurance (Errors and Omissions Insurance)? If you ever need to collect on a legal judgment, an inspector without insurance my not be able to pay your claim.

What if I'm buying a newly constructed home?

An inspection on a new home is important for the buyer to level the playing field. As in any industry there are shortcuts and tricks of the trade in the construction business, and someone who is unfamiliar with them can easily miss them. A home inspector is better able to see nuances that may not be readily visible to an untrained eye. You also need an inspector to offset the builder's or contractor's interest. Much of the information about homes is either taken for granted by people, or remains unfound.

For newly constructed homes, an inspection of the house before the drywall is installed, otherwise known as a "preclosure inspection", provides a level of quality assurance for the buyer that many builders don't usually provide for their contractors. This inspection gives you a better chance of identifying and correcting potential problems when they are much easier and less expensive to fix, before they become physically or financially prohibitive. For example, this inspection may prevent the need for moving a wall so that kitchen cabinets don't protrude into a doorway opening, or moving electrical receptacles so they are placed where you need them.

If you would like more information, or would like to order a home inspection, please call 714-478-3324, or visit www.ochomeinspect.com

5 Things Home Buyers Should Know

A house is the biggest asset that the majority of Americans will ever own. But while most of us delude ourselves into thinking that we actually know something about real estate, the truth is that few of us have any idea what we're talking about.

It's for this reason that I solicited the advice of several highly respected real estate professionals to help our readers navigate the process of both buying and selling their homes. What follows, in turn, are five things that most home buyers should know, but don't.

1. When you buy a home, you're making two purchases
Of all the advice that I came across, this was probably the most insightful: "When you buy a home, you actually are making two purchases,You are buying the home, and you are buying the money to buy the home.

It's tempting for homeowners to think of a mortgage as an incidental expense. But the reality is that the loan itself may be the most significant piece of the transaction.

"For every 1% rise in interest rates, home prices must fall by 10% in order for you to maintain the same monthly mortgage payment," Ness says. "And at the end of the day, that's what matters, the monthly payment. So take advantage of low rates; they add much more buying power to your purchase than low prices."

2. Homes are like people -- they all have problems
This was a point multiple real estate professionals that I spoke with made. "All houses have issues," Hilary Bourassa of Portland's Oregon First Real Estate told me. "Some just have more than others."

The shock generally comes when prospective buyers get their inspection reports back. "Inspectors are professional pessimists, which is why we love them," Bourassa said. "But many issues only require simple and/or inexpensive fixes."

Along the same lines, Ness analogized the experience to "when someone knocks over the DJ table at a wedding and the music stops." All of a sudden, the bliss from going under contract goes away.

"Most inspection reports will be 40 to 50 pages long, and most inspectors will take close-up, HD photos of problems," Ness went on to note. "So while the actual listing shows gorgeous pictures of granite countertops, the inspection report will show awful pictures of a cracked driveway. By the end of the report you'll be thinking, 'This house is a total and complete lemon.'"

3. Your real estate agent is a partner, not a salesman
My industry sources were obviously biased on this point, but there's a lot of truth to what they said.

"Your Realtor should be focused on helping you find a great property, not selling you something," Bourassa advises. Before settling on one, she urges home buyers to "interview at least a few in order to find the fight match."

The flipside of the coin is that you, too, are a partner in the relationship. And that means knowing and respecting the boundaries.

"Sometimes clients forget (particularly first-time buyers) that Realtors have other clients and lives outside of work," Ness says. The key is to make sure that both parties have a clear understanding of communication expectations.

"What is their normal response time? How much lead time do they need to arrange showings? What medium of communication is best -- text, call, email, or something else?" These are the types of questions that Ness encourages homebuyers and real estate agents to settle at the outset.

4. HGTV does not resemble reality
My wife and I love to watch cooking shows. We've watched so many, in fact, that we've deceived ourselves into believing that we could actually compete on them. Of course, given the opportunity, we would most certainly -- and I do mean "most certainly" -- crash and burn in the most humiliating fashion.

And the same can be said about the proliferation of "realty" television shows on real estate -- think HouseHunters, Flip That House, Holmes on Homes, Property Virgins, and Property Brothers, among others.

"The reality is, hundreds of hours or footage is shot and edited down to a 16-minute show (when you take out the Lowe's commercials)," Ness pointed out. "Yes, they're real buyers, but you don't see the half of it. So don't think you're going to waltz into your market and find the perfect house right away, beat out all the other offers, and then walk into the sunset with your significant other. Finding a home can be tough, and take time."

Ness' advice? "Gear up for the homebuying process. It's worth it, but it ain't Hollywood!"

5. Always think about resale
This final piece is something that all people buying assets should always keep in mind: At some point you're going to resell it and will want to maximize what you eventually get.

"When you're buying your home, you're probably not thinking of the day that you will have to sell it," Bourassa said, "but you will be thanking yourself one day if you remember three little things ... location, location, location!"