Earnest money is a great way to show a seller you’re serious about the offer you’re making on their home. But first, what is earnest money? Investopedia helps define earnest money as a deposit from a buyer to a seller to represent a buyer’s ‘good faith.’ The deposit is a way for buyer to receive extra time to get financing and conduct the title search, property appraisal, and inspections before closing.

By placing this deposit down to demonstrate your commitment to follow-through on the contract, you’re saying “I love this home and I’m ready to go.” But there’s a real risk involved: If you make a mistake, you might be out a chunk of cash.

Here are some ways to avoid burning your home-buying bankroll in lost earnest money:

1. Make sure it’s the home you really want. Seem obvious? Sure. But it’s easy to get swept up in the moment. Recognize that you’re about to enter into a legally binding contract and that the money you’re risking will hurt if you change your mind. While you may not be able to drag your feet on the decision, check your gut to see if there are any reservations lurking there before you go all in.

1. Don’t sacrifice contract contingencies. Don’t let your desire for a home cause you to blindly remove contingencies which are built into contracts to protect buyers. Common ones include loan contingencies, title search issues, appraisal, and insurance obstacles. Waive these at your own peril.

1. Avoid committing to a home “as is.” If you’re putting earnest money on an offer for a foreclosed home, don’t be too eager to accept any problem the home may have. Take the time to understand the home’s issues before you write the offer.

1. Read the contract timelines. Look at closing dates and other dates related to the process leading up to closing. Violating the timeline could cost you your earnest money as well.

1. Ensure you have recourse to get some or all of your earnest money back. If the sale doesn’t gel, you and the buyer will need to sign a document voiding the agreement. Don’t sign this until you understand how it will impact your earnest money refund. The seller’s title can be negatively impacted if you don’t sign off, so keep your leverage handy until you’re sure you’ve been fairly treated.

Protect yourself and your down payment by playing smart with your earnest money. If you have questions or concerns, ask your agent to help you understand everything in plain language!

Ready to buy? Let me help you find the right home and protect your interests along the way. Contact me at (928) 710-9148.

Homeowners insurance is vital for protecting your investment. It’s also required by lenders holding the mortgage on your home. For some reason, many homeowners overlook ways they can save money on their premiums. Shopping around is a good idea, but much like auto insurance, there are many simple things you can do to impact how much you pay annually to protect your home.

• Raise your deductible. Do you really need a low deductible on your insurance policy? Many people can absorb the hit if they go from a $500 deductible to a $1000 deductible, and in some cases, this simple move can reduce rates up to 25%. Deductibles can have a dramatic impact on your premium, so ask your company rep to quote you the difference.
• Don’t insure for your home’s purchase price. Remember, you don’t have to re-buy the land your home is on if you have to rebuild. If you’ve asked for coverage which includes the land cost as well as the structure cost, you could be paying far more than you need to pay to protect your home.
• Retired? Seek a discount. If you’re over 55 and you’re retired, your insurance company may be willing to drop your rate by as much as 10%. This is because those that are retired are home more often, which helps reduce burglaries and provides an early warning system for fires.
• Ask for a loyalty discount. If you’ve been with your insurance company for at least three years, call them up and bring this to their attention. Let them know you’re considering shopping for a new policy, and you’re curious if they can extend you a discount for being a loyal customer. Savings can range from five to ten percent.
• Adjust your coverage for possessions. You may be insuring for more than you own. Certain high-end computers and other luxury goods may depreciate over time. If the limits on your policy far exceed the value of your possessions, make changes to your policy. The difference can add up. (Do this every year.)
• Purchase home and auto policies from the same insurer. Insurance Information Institute states that buying two or more insurance policies from the same insurer will often reduce your premium. Most companies that offer homeowners insurance also offer auto insurance. However, make sure to check that the combined price under the insurer is a better price rather than buying coverage separately from different companies.
• A good credit record. Insurers will use credit information to price insurance policies, therefore, a solid credit history will cut insurance costs. Checking your report periodically is a good idea to check for inaccuracies. If you do find an error, the best way to attempt a correction is through a dispute letter. Dispute letters allow you to formally request a fix by the reporting agency. Though it may take a little time to get the errors removed, cleaning up these mistakes can have a direct (and favorable!) effect on your credit score.

Factoring in insurance costs is an important part of determining how much home you can afford. For more information on how different types of homes can have different insurance costs, talk to me today. Contact me at (928) 710-9148.

Discovering an error on your credit history can be a rude surprise when you’re attempting to get pre-approved for a mortgage. Though most people don’t think about the details of their credit report until the need to secure a loan, it’s a good idea to check your report for inaccuracies periodically.  It is easy to do, each of the nationwide credit reporting companies, Equifax, Experian, and TransUnion, are required to provide you with a free copy of your credit report, at your request, once every 12 months.

If you do find an error, the best way to attempt a correction is through a dispute letter. Dispute letters allow you to formally request a fix by the reporting agency. Though it may take a little time to get the errors removed, cleaning up these mistakes can have a direct (and favorable!) effect on your credit score, helping you secure lower interest rates and better terms.

Here’s what you’ll need to include for each mistake you find:

1. Which account shows the mistake.
2. Specifically what’s incorrect about the account where it appears in the report.
3. What changes should be made and why those changes should be made.
4. Any supporting evidence or documentation which will bolster your claim.
5. Send letter by certified mail with a return receipt requested, so that you can document what the credit reporting company received.

For example: “On my report, the Chase Visa ending in XXXX shows my account is still active. I closed this account in 2012 and should be shown as closed, not active. Included is a letter from Chase bank, confirming the date of the account’s closure.”

It’s a good idea to keep copies of everything you send. Also, be sure to send the correction to all three major reporting agencies (Equifax, Experian, and TransUnion) as well as the original creditor (i.e. the credit card company, utility, etc.). You can find the current dispute mailing addresses on these company’s websites. Federal law mandates that agencies must help you within 30 days. Keep records of your disputes and when/how you communicated with the agencies.

An article by Experian offers insight on credit scores and disputes. Filing a dispute has no impact on your score, however, once your dispute is processed, that is where your credit score could change. Along with this, updating or changing information such as identification or address information will not affect your credit score.

Why Clean Your Credit

Having the cleanest credit report as possible will result in a higher credit score, that in turn increases your chances of getting pre-approved for a mortgage.  A low credit score means that you will be charged a much higher interest rate when you apply for a home loan. In addition, if you have a low credit score, you will be required to contribute a much larger down payment of cash.

When looking to be pre-approved for a mortgage, you first need to get your credit report as clean as possible, pay off as many debts as you can, and make on-time payments.  One of the hands-on things you can do today is set up payment reminders and pay your bills on-time.  After these steps are taken, you can then sit back and watch your credit score rise!

According to the law, negative credit information stays on your credit report for seven years. On the other hand, positive information can remain on your credit report indefinitely. That is why getting your credit in shape is an important step to take when you’re preparing to buy a home.

I help buyers prepare every day! Contact me at  today (928) 710-9148, I would love to help you buy your next home!