So you want to buy a House - But you may be asking yourself.... "I found my realtor.... what else do I need??"
The Answer is: A LENDER!
"The bigger the dream, the more important the team."
-So I like to think a team approach is the only approach- No one can be an expert at Everything.
What I mean by this is although we as agents do our best to equip ourselves to inform you as much as possible to help in buying a home - we leave the expert information.... well to the experts.
Thats why I was fortunate enough to talk with one of my amazing partners who helps some of my clients and pick her brain to get you some answers to your most commonly asked questions!
So in talking to Sarah - I asked her some of the most common questions and have included some of the information for you below!
Where do I begin?!
Start with calling your mortgage professional. You can never start too early, and getting pre-approved is FREE of charge to meet with a mortgage lender. This is such a quick, easy thing to do, and many people hesitate to have their credit pulled because they might be looking three to six plus months down the road.
There is no better time than NOW, as you might not know what your true credit is and what reports to it.
You would hate to have any surprises that hinder you, so best to review ahead of time. It is so important get a general idea of where you stand and what you can afford¸ so you are not scrambling against the competition who are already “teed” up ready to go. This could mean the difference of getting your dream home, or moving on to the next.
Typically most sellers won’t even consider your offer unless you are approved by a reputable lender, and I like my clients to have a “pre-approval” letter vs a “pre-qualification” letter.
When a lender issues you a pre-approval letter it states that you have received it reviewed the documentations (W2’s paystubs, tax forms,) and is a stronger letter.
It's worrisome that I have sometimes me with buyers that were previously “pre-approved” by another lender, and where eventually turned down by that lender. It showed a lack of questions and pre-underwriting that went into the client and created a lot of frustration, disappointment, and not to mention a waste of the client’s time, seller’s, and your agents.
It’s highly recommended that you work with your lender to get pre-approved BEFORE you begin house hunting. A Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence in competitive markets.
Is it hard?? What do I need to get pre-approved?
-Have no FEAR!-
Getting pre-approved is easy!
You will start by filling out a mortgage application. Some important information you will need to have on hand will include items such as your address, social, date of birth, along with your address, work information, how you are paid, and where your down payment will be coming from, if applicable.
It is a myth that you need 20% down to purchase a home.
There are many flexible options that even have as little as 0-3% down payment.
You will also need to fill out an application to pull credit, and start gathering your paystubs, W2’s, and tax returns for the last two years. This will be a great start for the lender to see what you can afford, and also where the client’s comfortability is with what they want to spend.
I always have a conversation with my clients with the difference of what you are pre-approved for, because it always matches with what they are comfortable paying. Just because someone maybe approved for a $500,000 home, doesn’t mean that is what the client wants to spend. This is where I focus my strengths on getting to know the clients and what the clients’ goals and financials are, and then fit them with the best loan program.
Is it important to get pre-approved with a reputable company?
YES YES YES
There are a lot of different thoughts on this question - Getting a pre-approval letter from your Ma and Pa mortgage companies might not be taken as seriously in the sellers eyes if they do not recognize the lender, or if they are out of state just due to the "unknown." Some clients also go to the quick online resources that seem like a "quick and easy" way to get a pre approval, but these companies are simply just an application. They don't get to learn about the client, the clients goals, or really do a lot of research - these resources have shown to only give clients a "Rough" idea of a pre approval in the short term.
A misconceived notion some other clients have is if you have a checking’ account at a bank, then that must mean you will get better rates and/or servicing on the mortgage. This may be true! But we always recommend to do your homework - Research your loan officer, read reviews, and make sure you are dealing with someone who can educate you on the best program fit for your financial situation!
What Happens to my credit in the process?
Many clients put too much emphasis on doing a first or second time credit pull.
Credit bureaus give you a little flexibility if you are pulling within the same industry (two mortgage pulls). It is when you start doing multiple pulls from various industries (a car loan pull, a Target credit card pull, and an insurance pull) that isn’t the most favorable for your credit. If you do one or two hard pulls in the same industry, it really won’t be detrimental. If you are concerned about this, please talk to your mortgage advisor for more information on the risks/options.
wHAT MAKES THE SMOOTHEST TRANSACTIONS?
Start by calling your lender TODAY and if they think it is best, fill out a mortgage application, gather the required documents listed above, and schedule a one-on-one consultation to review timelines, as well as what mortgage program is the best financial fit for your current situation.
As important as it is for you to meet with your lender to "interview them," they are in the same boat to make sure they can meet all your needs and get you on the best program possible!
I want a house now! how fast can i close?
As much as we want to get you into your new home as quickly as you want to move - there are still pieces that take time in the process!
A typical closing takes anywhere from 30-45 days. There are instances where you could close sooner, sometimes as soon as two weeks, so make sure to review your expectations with your real estate agent and lender to make sure we meet what your goals are to get into your new home. This is a team process that involves your agent, lender, and most importantly YOU the client!
Closings really are determined by a lot of moving pieces that include how quickly and efficiently everyone gets the information needed. But the earlier you start the pre-approval process, the more quickly and smoothly the process goes once you are prepared!
What does a lender even do?
The short answer: A LOT!
A lender provides the financial backing for you to close on your home.
They measure several factors, including:
Capacity: Your current and future ability to make your payments
Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
Collateral: The home, or type of home, that you would like to purchase
Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
But what about your costs?
There are several factors that go into determining your rate and fees so there is not just "One price fits all."
The following should be taken into consideration:
Credit score, loan to value, debt to income ratios, how you pay your bills, type of mortgage loan program, if you are escrowing for taxes and insurance, loan amount, and length of the lock.
I compare it to when a patient walks into a doctor’s office and is sick. If you say, “doctor just by looking at me…what is wrong?” Without examining the patient it would be very difficult. Same with quoting rates, without pulling credit and going through the necessary steps above, it is hard to give an accurate assessment.
This is how companies mis-quote rates; this is why it is best to provide all the information, so you can ensure your quote is 100% accurate!
"This could mean the difference of getting your dream home!"
Of course this blog is simply a resource to give you some rough direction to help in making your home buying and selling process that much easier!
This specific blog just goes to show the beginning of the importance of your TEAM who is there to help take care of you every step of the way!
We each hold an important role to get you into your "Home Sweet Home," and although it may not always be easy - it will always be worth it when you have a strong backing behind you!
But I Have More Questions?!