Searching for your home and touring different neighborhoods is the fun part! Figuring out how you’re going to pay for that new dream home…that can get tricky!
Most of the time, if a transaction is going to go sideways it will be on account of the financing. It’s rare that mortgage lenders make mistakes in the days leading up to your closing (though it can happen). It’s far more likely that an issue no one could have foreseen will pop up, like an old student loan payment marked as delinquent due to a bug in their system. Your dream house hangs in the balance because of someone else’s mistake 8 months ago…
Almost every home transaction has some bizarre little financial mystery attached to it, which is why it's imperative that you have a lender who knows you personally and can do whatever it takes to get you to the closing table.
What you need to know first:
There are, however, a few things that you can do to prepare yourself and your lender for the best experience possible. First it’s important to understand what a home loan includes: the principal loan amount, which is how much you’re borrowing, and the interest rate, which is the percentage you’re charged for borrowing the loan money. Second, understand that there are many different types of loans. While you don’t need to understand all the different loan types up front, you should have a basic understanding of what loans you qualify for (Conventional, FHA, VA, etc.). Third, decide how much money you’re able to put down on a house. Almost all loans require some amount of money up front. It’s best to go into your next home purchase knowing that info.
The next steps are the important ones:
Get your finances in order. Know your credit scores. Pay off as much debt as is possible; things like credit cards and personal loans should be the first to get your attention. Be sure your taxes are up to date and readily available. Your lender will need things like mortgage statements, car payments, rent receipts, and paystubs from the last 6-12 months. You’ll save time by having these things ready.
Shop lenders. Keep in mind that all lenders are going to use the same basic information to offer you a pre-approval amount and a finance rate. That’s why it’s so important to shop for your lender, and you can start doing that before you begin looking at homes. You can check out your local banks, community credit unions, and mortgage brokers. A mortgage broker is one who will also shop many different lenders all at once for you and often has programs and deals that banks can’t/don’t offer. You may also find that a mortgage broker provides better and more thorough communication. In the end, you’ll find that shopping around really gives you an advantage.
Choose a lender. Make your decision based on how well the lender communicates with you and understands your needs, and what options the lender can give you based on your goals. Your lender will provide you with a pre-approval letter and you’ll use that letter alongside any offers you make on houses you wish you purchase. This tells the seller that you’re serious and you’re actually able to buy their home.
Once you go under contract, you’ll usually have a specified period of time during which you must secure your financing. That means you get an approval from your lender ensuring that the loan is secured and you are ready to buy the house. This time period is crucial and your lender may ask you for a lot of documentation. Answering quickly and providing the information as fast as possible will help to keep you on track to close on time.
Close the transaction!
Buying a home is usually the biggest transaction you will ever make. Having a mortgage broker or lender that you can trust who has your best interest at the forefront is so important for the transaction to be successful. If you aren’t sure where to start, your Round Table Realty agent can absolutely give you a list of mortgage lenders and brokers that our clients use regularly! This will help you start your search.