The Boston2.com Real Estate Blog

What Happens to the Deposit When Buying a House?

Know that all deposits are negotiable. Many will say that the required deposit is 5% and this is not true. If you are putting 3% down or 0% for a VA loan, then most likely a buyer wouldn’t have 5% to put in deposits. Another example is a home buyer who is selling their house and utilizing the equity in their current home for the next purchase. They may not have the large lump sum available.

Massacbhusetts Home Sellers like to see 5% of the purchase price in deposits, but again this is not a requirement. This is negotiable.

How/When Do the Deposits Work?

Normally there are two deposits throughout the offer process. The number of deposits however is also negotiable. Recently we put a property under agreement where the buyer had three deposits with the third being when his current house sold. We have also put properties under agreement with just the initial deposit. Everyone’s situation is different.

To the Massachusetts Home Seller, the deposit is what ensures that the buyer will perform in the transaction. The deposit is what holds a buyer’s feet to the fire. If they don’t perform or decide to walk away, then they could lose the deposit.

The first deposit is due at the time of the acceptance of the offer. This is called the binder. In order for an offer to be valid there must be some type of consideration to "bind" the agreement. It could be $1, but generally when buying a house in Masscahusetts, we see this initial deposit as a $1,000.

In most transactions, the second deposit comes at the time of the signing of the Purchase and Sale Agreement. This is generally about two weeks after the initial offer has been signed and after a home inspection has been performed with any inspection issues having been negotiated.

Is a Cash Deposit Bad When Purchasing a Home?

This is really about the Seasoning of Funds for the deposit. Seasoning of Funds means the time of which the money has been in your possession in your bank account.

Cash isn’t necessarily bad when buying a home, but it can make things a lot more difficult when not dealt with properly. It comes to a documentation of the cash.

If you are planning on using mattress money to buy a new home, then it’s best to start planning before you find a place to buy. If you can start depositing the money in bank accounts before it will save you a lot of hassle. Speak with your mortgage banker as you start the process for some best practices.

A mortgage lender will not be able to verify cash, however they will need an explanation as to where it came from. The rule of thumb is that any cash deposits that are over half of a person’s normal pay will be flagged for needed explanation.

A mortgage lender will ask for bank statements for the two prior months. If the cash is already in the account and has been “seasoned” then no questions will be asked.

Companies like Venmo are turning out to be a huge benefit to this process as people become more used to electronic transfers over cash payments to friends, family members and vendors.

What to Look For When Shopping for a Loan

Rate isn’t everything when you are shopping for a home loan. Rate is a massive factor, but it isn’t everything. Things that a buyer should consider when shopping for a loan are Rate, Closing Costs, Working with Someone Local (or really in the same time zone) and the Reputation of the lender.

Rate

Rate is important. Your interest rate is actually VERY important. An 1/8 of a point can save you thousands of dollars throughout the life of the loan. The interest rate should be a major concern, but sometimes the lower interest rate can because they are charging a point (WHAT IS A POINT CLICK HERE FOR ARTICLE) which effects the closing costs.

Closing Costs

Many times, a buyer can be quoted a lower interest rate only to find out their closing costs are higher. These closing costs are higher due to them paying an up-front cost to reduce the rates.

The great news about closing costs is that whatever a bank estimates for closing costs in the GFE (Good Faith Estimate), they must come within 10% of that amount otherwise they are required to eat the cost. In other words, if a lender quotes you $5,000 for total closing costs then anything over $5,500 they are going to have to absorb.

Working with Someone Local

Working with a local mortgage banker is something that should be a large factor for consideration when choosing a bank. And it isn’t necessarily just the mortgage banker, but where the underwriter located as well.

The time zone issue matters a LOT, especially if you are on the East Coast. If your underwriter or loan officer is on the West Coast (which is the case often times with these internet banks), then that means they aren’t getting in the office until noon our time. This can create delays...

Can You Buy a House After Bankruptcy?

Yes, you can still buy a house if you have declared bankruptcy. The length of time as to when you can buy a house after bankruptcy depends on what was discharged in the bankruptcy.

How Long After Bankruptcy Can I Buy A House?

A person can buy a house two years after a mortgage is discharged. The two years is after the discharge, not when the bankruptcy is filed. A bank will ask for a copy of the discharge papers. If a potential buyer has been foreclosed on then this time line will be different.

Does Declaring Bankruptcy Wipe Out My Credit

No. Often times in the long run and when done right it can a lot of times increase a credit score. The actual bankruptcy clears the debts. After the discharge, a person should get one of the minimal credit cards and charge a couple hundred dollars that they pay off at the end of each month. This will quickly rebuild credit history.

Need 2 Years Post Bankruptcy & What Else to Buy a House?

You still need the Big 3 when it comes to buying a house. Credit which the Bankruptcy if done right has helped, employment and down payment (equity). If you have those three pieces and two years (provided that you have not been foreclosed on), then you should be able to purchase a home. Remember that each person’s situation is different and they should consult a mortgage banker to help create a game plan to achieve your real estate goals.

What Does a Bankruptcy Do to my Interest Rate?

A bankruptcy can effect your interest rate based off of your credit score. If your credit score has gone up then it will affect your interest rate in a positive way.  There is not an additional risk layer where because you have declared bankruptcy they add a premium onto the rate.

What Does PMI Stand For?

PMI stands for Private Mortgage Insurance.

When is PMI Used?

The golden rule is that Private Mortgage Insurance is used when a buyer puts down less than 20% on a house. Generally we see Fannie Mae, Freddie Mac, FHA and VA loans utilize Private Mortgage Insurance.

All homeowners do not get PMI.

What is PMI?

Private Mortgage Insurance is essentially a risk layer that has been created by the banks to help mitigate their risk and thereby make them wiling to lend to buyers that are putting less than 20% down. PMI protects the lender – not the buyer – if they stop making their mortgage payments on the loan.

Why is it Important to Know About PMI?

Many potential home buyers don’t factor in the cost into their budget. Most people that don’t do this day in and day out don’t realize this is an expense (and how could you blame them!). When potential buyers start digging into the process they generally factor in Principal, Interest, Taxes and Homeowners Insurance into their monthly budget.

No one ever thinks about PMI. It is a rather hidden expense that can cost hundreds of dollars per month.

How Do You Pay For PMI?

A person can pay the PMI Insurance Premium upfront. Most homeowners however choose to pay the Private Mortgage Insurance premium monthly.

There are options to how PMI is paid for which a potential home buyer should talk to their mortgage banker about their specific situation and what is the most cost effective way.

How Much is PMI Insurance?

This is a loaded question as the cost is not a uniform cost or a specific PMI rate if you will. The cost of PMI is based off a potential buyers credit and the amount of they...

Okay, Not Quite Lies… But Misconceptions about eXp Realty

There are so many misconceptions about eXp Realty. On both sides. Competing brokerages harp on non or even partial truths while eXp agents are sure to make certain things better or easier then they really are. I know this was the way it was before eXp came into the picture (think RE/MAX vs. Keller Williams), but feel that it has really gotten out of hand… The eXp Realty complaints I find are generally from agents that never joined the company. Working for eXp isn’t for everyone… Just like KW isn’t for everyone either.

Everyone should keep their opinion about competing brokerages to themselves. Seriously, shut up. A bunch of keyboard warriors… Speak your opinion when spoken to (For the record, if you are reading this then you googled a term and clicked my blog so therefore are asking for my opinion/experiences)!

You Will Join and Everyone Else You Know Will Join Under You

Call 100 eXp agents and I feel like 99 of them will tell you how easy it is to recruit. They will say that when you join, they will teach you how to recruit and everyone you know that is an agent will want to talk to you and will sign up under you (Side bar, when RE/MAX sells you a franchise they make it sound like you will open your doors and people will flock to you and beat down your door).

This isn’t true. Recruiting is hard. Shit. It’s cut throat. Money is involved so therefore people’s feelings can get hurt. I believe most eXp Realty Complaints come from this. It doesn’t matter how great the company is… Recruiting is a process and if you want to be successful... Then...

Why I joined eXp Realty

I got pitched eXp 83 times before I finally joined. Heck, I am sure I was one of those eXp Realty Negative Reviews! I was SO tired of the eXp Realty Pitch… It gets really annoying when people pressure you when you aren’t soliciting their opinion. I have mentioned this before, but really find this as one of the most annoying things about the company. That being said, again… I get it. This mindset has made a lot of people in this company multi multi multi-millionaires… That is How eXp Realty Works.

I joined eXp when I was ready to. I reached out to (what ended up being my sponsor) the agent with questions… My sponsor abruptly joined eXp. He was an independent agent with a large and VERY successful company. I was at his office a month earlier for a Mastermind. When he joined, it turned my head. And made me pick up the phone and call him to say “what the heck, I thought eXp Realty is Bad?”… That is when I think I had my first very real conversation about the eXp opportunity.

Revenue Share that my wife can inherit

I had been talked to… or maybe it was talked AT numerous times about the virtues of eXp. It’s amazing because no one ever took the time to learn what was important to me. If they had, then they probably would have been able to better articulate the virtues of eXp.

To understand me, you first need to understand that my father passed away when he was 50 years old. Whether right or wrong, this has been something that has hung over me for the better part of my life. One of my biggest fears is leaving this world and leaving my young family unsecure. While I do have life insurance, because my Dad died so young… It is VERY expensive.

Back to the agent I called. I asked him why he is leaving the Real Estate Bliss of being independent and going to eXp. That’s when...

Is eXp Realty Really Worth it – Why I Decided to Stay

I spent some time discussing the eXp Realty Negative Reviews and now its time to talk about why I ultimately stayed. I don’t like being the guy that focuses on the negative which is what I felt like so many were saying on my recent therapy session… I mean blog post, eXp Realty Bad Review – What I Don’t Like About eXp 

I ended that article noting that I am still at the company and quite frankly it is for good reason. While there are not as many reasons as to why I am still at eXp Realty, I have come to the conclusion that these reasons far outweigh the negatives of eXp Realty. So back to the question of Is eXp Really Worth It?

 I have always felt that where you work and for the reasons why are personal. I think it is absurd for people to get all wound up pounding their chest with a “my brokerage is better” attitude. That’s great. I am happy it works for you. But shut up and sell some real estate. Let’s improve the conversation by talking about how to continue to elevate the industry and provide more for our individual families.

To that end, here are the reasons why I have decided to stay at eXp Realty (for now! Because you never know when there will be another opportunity that comes along).

Lower Fees - $22k a Year

Agents ask How Much Does eXp Cost all the time. And the answer is… It depends. I am an Icon agent which means I “cap”. Long story short, that is me paying them $16,000 in fees. I also pay them about $5,000 in transaction fees. My last cost is the $85 per month in recurring fees. All in, I am at $22k a year as the team leader to operate a $40 to $50m a year business.

As I have said before, I am a high D personality...