Have you talked with a Lender yet? If it’s not, you SHOULD. Looking at homes online is merely a dream, and if you’re serious about wanting to purchase a home, you first need to get your financing in order. There are numerous reasons as to why. Here are my top five reasons to start with a lender.
5. What if the payment you want doesn’t translate to the price of homes you are looking at?
There are a number of variables that can quickly change the monthly payment. From downpayment amount, private mortgage insurance (PMI – if you put less than 20%), Interest rates (as the fluctuate daily), the property taxes, the HOA fees, even homeowners insurance. You may be able to put more down than you thought. Did you know you could use a portion of your 401k towards a downpayment without penalty? Fully understanding all the programs available, and how they could impact your monthly payment is important.
4. What if the loan type you want to use doesn’t work for every area?
There are SO many loan programs out there today, you may not be aware of all your options. Also, I have found that not all lenders have access to ALL the same programs. Most of the ones that come from Fannie Mae or Freddie Mac will be the same; however, some are unique or special to the lending company. Understanding your financing programs could open up doors for you, that you hadn’t even considered. For example, certain zip codes may qualify for grants that could make your dream home more affordable.
3. What if you get your heart set on a house only to find out you don’t qualify?
Unfortunately, qualifying for a loan isn’t as simple as having good credit, and knowing you can afford a monthly payment of $X amount. Your interest rate could go up or down by a 1/4 of a point based on that credit score (Credit Karma is not a good source for scores when it comes to Mortgages). Another area people often overlook is debt-to-income. While you may have no credit card debt, maybe you do have a child support payment or a car payment or a judgment. There are numerous other obligated debts I could come up that could be a factor, restricting the amount of payment the lenders will allow you to have. Did you recently change jobs? Or Are you self-employed? The lenders will require your last two years of tax returns to verify historical income, and also want to see 30 days of employment.
2. You’ll basically be a cash buyer and will be prepared to make an offer when the time is right
Being pre-approved and having the lender fully underwrite and approve you, can make your offer much stronger to a seller. They’ll see everything has been verified, and that you qualifying is a sure thing. In the seller’s mind, that’s one less thing that could go wrong. It provides them certainty.
1. What if you find the right house but then it sells before you have a chance to go through the prequalification process?
Market conditions will vary depending on your area, price point, etc. Typically what we see in a seller’s market there is more urgency to get an offer in, on a new listing that amazing. The best homes go fast or even sell “coming soon”. Picture this,…you have been looking on Zillow for MONTHs, and finally, the home of your dreams, (and five other peoples dreams) hits the market. If you have to urgently get a hold of a lender to start to get pre-qualified, you’ve already lost. While you’re taking the time to get financing in order, four other families will be writing offers. Now you’re pressured for time, stressed you may lose it and may have to offer more on the home than you were prepared for and are starting to second guess yourself. Is that a position you want to find yourself in?
These are just a few reasons why it’s best to start with a lender before home shopping. There are tools out there to help you better ballpark these numbers, but understand they are all subject to a variance. Here’s a great affordability tool by realtor.com
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