You would expect a realtor or a mortgage broker to tell you to get pre qualified before you go looking for a home. I am not just asking you to, I am begging you to. When you go out and make an offer on a home without being 100% sure that you will be able to qualify for it, you are potentially setting yourself up for a stressful situation; stressful for you, stressful for your loan officer, stressful for the home seller and your real estate agent.
You can enter into a real estate sales contract only to find that what you want to do and what you can do are dramatically different. But the most important reason to get pre-qualified for a loan BEFORE shopping for a home, is that in today’s market, ½ of the properties on the market are either short sales or foreclosures and the banks will not accept an offer without it! Plain and simple. Aside from my own opinion there are practical reasons for getting pre qualified. The first would be that when you are negotiating a contract, the seller has one less thing to worry about. If you are in a multiple offer situation with other parties looking to buy the same property and you have gotten pre qualified, you stand a better chance on having your offer accepted.
By getting pre qualified you actually take a concern away from the seller. I can tell you from experience that this makes you a more attractive buyer. They may even bend on their asking price a bit because they do not want to lose a solid buyer, especially when the market is slow. With that said most people will still wait until the contract is accepted before they do their research on mortgage financing. It you do this; you are potentially setting yourself up for a surprise.
Simple steps to take to obtaining the right financing for you;
(I can help find a lender, identify the financing method that works for you, and prepare you for the next step).
*Even if you prequalified for a loan, you’ll still need to shop for the best type
of financing to obtain.
*Finding the right financing package that best suits your needs is the first step.
*When you apply for the loan, your lender will ask a number of questions.
Have this information ready:
1. Account numbers or identification numbers for checking and savings
accounts, stocks and bonds, life insurance net cash value, automobiles and
other personal property possibly.
2. Provide documentation of loans, terms of loans and balances for installment
loans, including charge accounts, auto loans, alimony, child support,
maintenance payments, etc.
3. Income information about base pay, commissions, bonuses, tips, overtime,
part-time work, savings interest, dividends, rental from real estate, alimony,
child support, etc.
4. Anticipated costs of home ownership like property taxes, hazard insurance,
mortgage insurance, utilities, etc.
5. Credit references and job histories (including names addresses, types of
business, positions, dates of employment and monthly income.
*There are several questions you should ask a lender:
1. Do you have fixed-rate loans and adjustable-rate loans available?
2. Will mortgage insurance be required for loans other than FHA or VA
mortgages?
3. What reserves, such as those for property taxes or hazard insurance are
required?
4. What fees will be charges at closing, including such things as points, loan
origination fees, appraisal, termite inspection reports, credit reports, etc.
*Go over all the options with your lender. There are many types of loans, such as conventional financing, adjustable-rate loans, and standard fixed-rate loans. There are also government loans, new teachers programs, and loans for veterans available. I can help you understand which is best for you.
*Know what to expect in closings costs. Within three days after you apply for your loan, your lender should issue you a good faith estimate that spells out the fees to be charges at closing. Here are some of them:
1. Loan fees such as an origination fee is a percentage of the loan that covers
the lender’s administrative costs. Loan discounts or points are the amount withheld from the loan proceeds by the lender. The amount is used to
adjust the interest rate of the loan to the required yield.
2. Fee charges cover the charges associated with the title/abstract search and
recording, as well as the transfer charges.
3. Other charges could be a home inspection, survey, appraisal, commissions,
such as for document preparation and notary service, as well as additional
lender charges.
*Before closing escrow, take one last walk-through, just to be sure that everything is as it should be. If there are any problems or unresolved issues, take care of them before closing.
*Closing escrow is the final step to closing the deal. Here’s how to prepare for an easy closing:
1. Allow for one to one and 1/2 hours for signing all the papers, usually
scheduled one week to three days prior to close of escrow.
2. Call ahead with the name and phone number of the home owner’s
insurance provider, if required by the lender.
3. Review all the papers ahead of time, carefully, and be sure that they reflect
the agreements between you, the buyer and the seller.
4. Bring a photo ID, such as a driver’s license, to the closing appointment for
signing and notarization of the loan documents.
5. Any required funds must be brought in the form of a cashier’s check or wired directly to escrow (unless the escrow agent will accept other types of funds) and should be brought to the escrow agent when the loan documents are to be signed.
6. Look carefully over the numbers in the closing or settlement statement–
especially the last one to appear!–before signing.
