Finding the right lender to finance your dream home can be challenging. Most of us have a natural avoidance of telling people or financial condition. Just know that buying a home with a home loan is a part of life these days. And let's put the cart behind the horse now, Get approved to buy before you shop for a home. That way you will know what you can afford comfortably and you will be able to make the right offer immediately.
1. Get Ready to Disclose Preparing for a home loan requires several hours of work on your part. Most lenders are more than willing to give you great service in return for great information. Trying to obtain a loan with incomplete or inaccurate information will not bring success. You will need tax returns, bank statements, payroll stubs, credit history, and any events that may enhance or play a negative role in obtaining a loan. Great lenders have seen it all, so don't be shy. If you are asked for information, provide it in a timely fashion. Remember the clock is ticking away your chances to buy at the right price and right financial package including interest rates. Withholding that late payment history will show up when your lender does their research, so disclose now and work closely with your lender. Remember, they get paid when you make the loan approval and enter into a mortgage, so they will use their skills and creativity to help you. Lenders are not the enemy, they are your partner in borrowing money for your dream home.Your communications will be kept confidential. Even your Agent will not know what your lender knows. And lastly, protect all communications with your Lender. Never give bank account routing numbers to anyone over the internet. Always speak directly to your Lender regarding any bank routing number requests and be careful of suspicious emails just before closing that request any confirmation as your Agent, Escrow Officer, or Attorney will not be sending that request to you. Online criminals are stealing money from closing transactions everyday. Beware!
2. Interview Several Lenders The most likely scenario is that you would return to your last lender as they will have knowledge and direct access to your mortgage history. Lending is very competitive, so sometimes the best deal for you can come from an unexpected resource. Ask your Agent for at least three lenders that he or she may have direct knowledge of. Your best lenders are usually local banks, local credit unions, and local mortgage companies. The key word here is local because they have worked within local systems and understand local requirements and the related community. Doing business with a person you can see across the desk is far more interesting than working with an on-line person or automated device you will never meet. Lending is a people business and you can tell immediately if the process and person are working for you. Take lots of notes. Take time to compare the outcome of the interviews that you conduct. Pick your best lender based upon the range of services you need, timely response to your questions, and the level of caring that you feel during the interview. Let your Lender compete for your valuable business.
3. Credit Issues and Credit Repair If you have any negative credit history such as late payments, write-off by lenders or credit card companies,defaults, or bankruptcies, ask your lender for help up front. If a lender has no way to assist you with any of these issues, you must move on and find someone who can help. You would be surprised how determined a good lender will be to help you correct some history or repair your credit. Many times they work directly with credit repair companies to get things sorted out. Some issues will take time to correct but I can tell you that in my experience it can be done successfully. Several of my clients with serious credit issues have purchased homes after going through a credit repair process or after correcting inaccurate credit history that reporting agencies may have documented in error.
4. Getting Qualified Many people believe that they can buy a home based upon the pre-qualification that they may receive on an internet website. This is rarely the case. Lenders need to see all of the facts before making a loan into a realty for you. So be careful with the information that you provide to internet websites. Many are clearing houses that will sell your information to many other lenders. Once you click yes to their terms and conditions, your information will no longer be a private matter. If you like to hear your phone ring at dinner time, fill out forms on the internet. I can assure you you will be regretting that move. Instead, sit down with a local lender and get the whole story. After all,, if you are borrowing money for thirty years, don't you think you deserve more than a convenient form and ten minutes of your time. After you have worked with a local lender, you can always go back to the internet to compare things. It is not always about the interest rate or the ease of filling out forms. Just ask yourself why they make it so easy. Who is more important, you or the lender?
5. Down Payment This is the portion of the home purchase monies that comes from your supply of cash. It can be a combination of earnest money that is submitted with your purchase contract and the amount of additional cash that you wish to add to your equity or ownership amount of your home. When making offers in a fast-paced market with rising prices and multiple offers from multiple buyers, the old phrase that "Cash is King" can play an important role in your ability to obtain the property. Also, your interest rate and the amount you may borrow is also affected by your cash contribution to the purchase. Have you ever heard of PMI or Mortgage Insurance? Well that is not insurance for you, but instead it insures your loan against default by you. It protects the lender. In most cases, you will need to pay for Mortgage Insurance if you total cash down payment is less than 20% of the total purchase.
6. Employment Okay, so your boss just told you that things are looking grim at work and your friend just told you about a job opening at his workplace. Maybe it is more money and that is a good thing for you and your family. But wait, you just submitted employment history to your lender in hope of obtaining a loan for a new home for your family. So what should you do? If your income is necessary to get the loan approved, speak to your Lender before you change employment in any way. Most loans will not be approved with required income employment of less than two years. Sometimes if you stay in the same industry doing similar work, your loan might be approved. There is nothing worse than the feeling of a lost home opportunity because you tried to improve your financial picture by changing jobs. I have witnessed this in a case of a challenged buyer who had met loan criteria and then changed jobs without first discussing with his Lender or his Agent. His contract was withdrawn and he also lost his earnest money due to his own error. The bottom line, don't change jobs while seeking a loan and always consult with professionals to determine the consequence of any changes.
7. Spending, or Shall We Say No Spending The excitement of buying a new home can trigger the desire to purchase things for the new home. New furniture, appliances, home theater equipment, exercise equipment, lawn mowers, and even a new car come to mind. Spending on these items before your home has closed escrow is a mistake that you cannot take back. This is a sure way to loose your loan approval. While in the process of obtaining a loan, increasing your spending and extending additional credit related purchases is a huge mistake. The best advice I can give you is until your loan is approved and you have closed escrow on a new property, buy nothing, spend less, and save money. Once your home purchase is complete and recorded with the county, then spend responsibly and enjoy your new home in consideration of your new budget.
8. Know Your Closing Date and Closing Costs Getting ready for the new home means you must be ready to put your new mortgage in play and know your closing date. You will need to cover some additional costs in addition to earnest monies and down payments. Have you heard of Closing Costs? Well, your Title Company or Attorney has and you will need to have enough money within your settlement to cover all costs and fees in order to close. One example is a home purchase for $300,000.00. The associated closing costs and fees were approximately $3,400.00. My Buyer had a "Rainy Day" fund that he was able to apply to this expense because his loan did not cover those costs and fees. Sometimes a Seller might agree to cover those costs and fees in order to get his property sold, but that needs to be negotiated by your Agent before closing and many times before acceptance of the contract by the Seller. So how would you feel if you lost your home purchase over $3,400.00 that you failed to plan for? Be aware of the closing date so you have enough money to close on that date.
9. Closing Day - Hooray! Okay, so you made it to closing day. Try to get your closing appointment as early in the day as possible. Check to be sure that your Agent will be joining you. Sometimes things come up that your Agent can support or correct. Remember, a lot has to happen after you sign documents before your home purchase is completed and recorded. Closing on a Friday is almost a certainty that your house and monies will not be recorded until Monday. And if Monday is a national holiday, then expect Tuesday at earliest. Get ready to sign oodles of documents. Even though some documents may look familiar and you may have signed something similar, don't be surprised if you see documents to be signed again. The whole process will likely happen within an hour so plan accordingly. Your Title Officer or Attorney has probably done this many times, so just be confident that everything will get done as expected.
So, you made it, financing is in place, your bank or lender has transferred monies, your county has recorded title and you are a new homeowner. Congratulations!
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