Most people miss a key step before going to open houses: talking to a mortgage lender. Not only does this let you know how much you can borrow, it help you better understand which loans are available to you. It also makes you more attractive to sellers and real estate agents. In most cases talking with a mortgage lender costs you no money; the only thing you will be giving up is time.
5 Reasons to Talk to a Lender Before You Start House Hunting
1) It sets realistic expectations
There’s nothing worse than finding your dream home, then realizing that it’s just outside your financial reach. There are programs that allow you to invest little to no money down, but keep in mind the total monthly cost of ownership will be higher. Investing as little money as possible may sound attractive, however any money you can put towards a down payment, is equity in the property, and will hopefully continue to grow over time. Knowing up-front where you stand will make the process smoother down the road.
2) Identify what is on credit reports
In this modern world, your credit report and credit score is everything. It’s important to know exactly what is on your credit report before you make a big purchase. Did your college roommate skip out on cable bill that had your name on it or did that medical bill you paid not get recorded correctly? It may show up as a collection years later. Now is the time to get these things cleaned up. Your credit will determine the interest rate and potential borrowing costs when financing your home, so getting it looking as good as possible can save you lots of money over time. A good lender will work with you and give recommendations on how and what to fix, payoff, or leave as-is. The credit report that they run is only one inquiry and may be well worth it.
3) Makes the home buying process less complicated
You’ll need a lot of paperwork to complete the loan, including tax returns and W-2s, pay stubs and recent bank statements and possibly other items such as retirement account information. Starting the document-collection process earlier will make it easier when it’s time to finalize your loan, freeing up your mind to focus on finding the right home, instead of chasing down that W-2 from two years ago. The loan pre-approval will be in place, and once you find a property to make an offer on, you can hit the ground running. You are more or less done with the loan documentation legwork. The lender will love it, the seller will love it, and you will love it.
4) It helps you know what you’ll pay
That the first check you write may not be for only your down payment. After you apply for a mortgage, the lender will give you an idea of what other fees will cost such as loan origination fees, title fees and appraisal fees. While the seller often pays at least some of the closing costs, your share might still be as much as 3% to 6% of the loan amount. By knowing in advance what the financing will cost ahead of time, it allows you to know if you need to ask the seller for closing cost credit, or if you can cover it yourself. You will know your budget; you will know your borrowing cost and lower your anxiety before you buy.
5) It puts you in a more powerful position
Coming in with a preapproved loan offer, whether you’re talking to a real estate agent for the first time or a presenting an offer to a seller, shows your as hassle free, with all of the loan approval kinks worked out. Especially in a competitive market, it says that you are not “just looking” but that a you can be trusted when it comes to actually sign the check. A pre-approval shows to everyone that you are serious about the home buying process.
When you are ready to talk to a lender it can be as simple as a CLICK HERE to get in touch with one of our preferred lenders. No arrangement or deal with these or any other loan broker has been made in guarantee of service. Eligibility is not guaranteed and is on a person by person basis. Please use any loan broker that will fit your needs.