If you’re thinking about buying a home this year, I hope you will take some time to get ready and get prepared before you officially start the process. If it’s been awhile since you were “in the market” for a home, here’s a heads up–the rules have changed!
The mortgage melt-down of a few years ago has brought lots of changes to the lending/mortgage industry. And these changes affect all lenders, not just the big ones that we heard so much about when things went bad. They are federal guidelines that must be followed by all lenders. Different changes in place for different types of loans, but all lenders now are requiring much much more information and documentation from borrowers.
I am not a licensed mortgage professional so I can’t go into all the details, but after working with many buyers in the last couple of years and seeing them get upset, frustrated, and downright angry about what they were asked to provide, I have tried to prepare my current buyers for this new world!
Basically, before you actually go visit with a lender, either in person, on the phone, or online, gather all your financial documents from the last 2-3 years all together. This includes, but is not necessarily limited to, bank statements, pay stubs, credit card statements, current loan/mortgage information, car payments, child support, divorce decrees, tax returns, income/dividend statements, any financial gifts you may have received, student loan paperwork, pretty much anything that has a financial impact on your life.
What about a lender? Who should you choose? How should you choose? There are many excellent lenders out there who can help you. Many specialize in a particular kind of loan, just as attorneys and physicians specialize in certain areas. If you’re looking for a VA loan, for example, it makes sense to work with a lender who specializes in VA loans. He/She will know the limits in your area, have contacts with VA underwriters, VA appraisers, and other folks who will have a part in approving your loan. A VA lender will also be able to advise and assist your realtor to help you present a compelling offer when you find a house you like. As a Realtor, I always appreciate that kind of help and advice!
Where do you find a lender? Ask your Realtor! You should definitely be working with one! Most of us (Realtors) know lenders who can help you with particular kinds of loans, if you have a lower credit score, etc. My recommendation is to choose a local lender, not someone online who is not in your area. A local lender can usually help you easier and quicker than someone you connect with online.
Most buyers like to contact more than one lender initially, to compare interest rates, and I encourage that. But, as with anything you buy, be sure you’re comparing apples to apples. Small variations in percentage points or fractions of points will probably not translate into a huge difference in your monthly payment, but the fees and other terms of the loan may make a difference at the closing table. Be sure you’re considering everything, not just interest rates. And, as with other purchases, it’s not always about the rate–those other fees and terms can make a difference in the overall cost of your loan and what funds you’ll need at closing. Shop carefully!
So, you’ve done your homework, gathered your paperwork and financial files, and chosen a lender, gotten pre-approved for your loan. Good job! Now it’s time to go find a house with your Realtor! Once you’ve identified a property, made an offer, negotiated the terms, and gotten it accepted, be sure to let your lender know and provide a copy of the executed contract. Then, get ready to start sending paperwork! Figure on about 6 weeks from contract to closing, possibly longer for some loans or if you have unusual circumstances.
Be patient! There are a lot of moving parts and a lot of people involved in the processing and underwriting process. Your realtor and your lender should be keeping up with things as they progress and letting you know what’s happening, but if they don’t, then check on things yourself! If you’ve done your advance preparation, have a good realtor, and a good lender, then you’ll be celebrating in your new home soon! Congratulations, and good luck!