Buyers - Financing
What should you do before you start to shop for a home?
The first thing you should do when you decide to buy a home is find a mortgage lender you trust. Finding out how much home you can afford will help you zero in on your search for your next home. Selecting a lender should be based on more than just the lowest rate as many lenders will work with you on the terms and rates of your loan. First and foremost, you should find a loan originator with whom you feel comfortable. You need to be able to trust them enough to be candid about your finances and the possible roadblocks you may encounter along the road to financing your dream home. To find a reputable lender you can ask for referrals from friends, family and co-workers, meet with loan originators at your local banks. You can also ask your Realtor who they have had success working with. Look for lenders who specialize in the types of financing you are seeking, such as HomePath Mortgages, FHA, 203k, VA, conventional, etc. You don't have to apply for a loan to get information from a lender. You can find out a lot by simply calling to ask about loan programs. Find out about loan originator's experience with bringing loans to completion. You will be able to determine if the loan originator can explain the lenders' programs and what each option means for you, not just today but for the long term. They should be able to set expectations upfront, including how long the loan process will take. Having a good grasp on what the turnaround time will be is crucial because a delay in obtaining financing for your dream home and cause the deal to fall apart. The sooner you find a loan originator that you want to work with the better prepared you will be when you begin shopping for your dream home. A loan originator can get you pre-approved for a loan which you will need in order to make an offer on a home. Very rarely will seller will accept an offer that does not include a pre-approval letter or proof of funds. If you are unsure about your ability to obtain financing, a mortgage originator can make recommendations to improve your chances. They will also help clarify how much you can afford to pay for a home, and how much you will need on hand for the downpayment and closing costs. Other questions to ask:
- What happens if the appraisal comes in too low?
- What if the rate lock expires before closing?
- How much are the lenders fees? Fees can vary widely from lender to lender.
- Is it better to pay points to obtain a lower interest or put more money toward the downpayment? The answer may depend on your plans for the future and your finances.
The ultimate goal, getting to the settlement table with your financing in place, should be met as long as you have chosen a loan originator who understands your particular needs, knows the lenders programs and processes, and communicates well with both you and the Realtor you are working with.