Talk to a Lender
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One of the most important things to do when you are in the market to buy a house is…
Talk to a lender before you start looking for houses. The worst thing you can do is go out and fall in love with a particular house or neighborhood and then sit down with a lender only to discover you can’t afford it. It’s heartbreaking, depressing and ruins the rest of your home search.
Now the thing you should know about lenders is that there are so many out there — they’re all competing for your business. And what do we know about the Free Enterprise system? Competition is good.. good for you!
Shop around for rates — but it’s not solely about interest rates.
Finding the right lender also has to do with their terms. How much are they charging for all the various bits and parts of their services? Did you know origination fees are negotiable? Ask what all those charges are on their Good Faith Estimate. Also, as of 2010, new RESPA regulations go into full effect. One of the major provisions is that certain portions of the Good Faith Estimate must remains exactly the same from the time the lender issued this estimate to the closing date. Some portions cannot vary by more than 10%. The remainder can change due to variables in the market. This new rule came about after many consumers were offered one thing, but then given something else entirely at the time of their closing.
Today, more than ever, consider professionalism and competence as well. Not just of the bank representative with whom you are working, but also the the bank. Are they healthy? Will they be there in 60 days when your transaction is scheduled to close? Do they have the ability to underwrite your loan quickly and efficiently and in time to meet your closing deadline?
Effective 2008, there is no longer a Financial Contingency clause. Previously, this contingency said that if you were unable to get approved for your loan within a certain number of days, you could terminate. Today, this is all to be done under the “Due Diligence Period.” That’s why it is more important than EVER to have the process STARTED prior to looking. Once you find the house, it should simply be a matter of quickly finalizing the details rather than starting the process from scratch and then finding out you can’t qualify or need more time… Talk to your agent!
If you are looking to use an FHA or VA loan, how much experience does that lender or it’s rep have with those loans? For many years during the ‘boom,’ a lot of people got into the mortgage business. All they really did was sell conventional loans since at the time, conventional loans were simpler and quicker than federally involved loans like the FHA and VA. Conventional loans also offered low down payment or no down payment options.
- In this current market, most conventional loans have gone back to requiring higher down payments causing a surge in the popularity of FHA and VA loans – loans that are either insured or guaranteed by government entities, making them more attractive on the secondary markets. Make sure your lender is familiar with all the nuances of these loans and able to execute them properly!
There are large, national lenders, there are small hometown lenders, they each have their advantages and disadvantages depending on your needs. I have found, and most people I talk to agree, that banks with a physical presence in the community, be they large national banks like Bank of America or Wells Fargo or a locally owned bank just in your region or town, have a higher level of accountability within that community. They are actively involved with the REALTOR® community; you run into them at the grocery store; your kids might go to school together; you get the picture. A bank with no such presence such as large banks using strictly 800 numbers or on-line lenders – tend to have less at stake.
Many people are intimidated by lenders because they’re “bankers” and they deal with all these technical financial terms that we don’t understand. Well, a good lender will be able to answer your questions without raising more questions or leaving you confused. If you find yourself with a lender who is making your head spin… get up and walk out! You have no obligations to continue the conversation.
Ask your REALTOR®. We work side by side with Lenders everyday and have a good sense of each company’s strengths and weaknesses, their specializations etc. and can refer you to the right Lender for your specific needs.
Once you find a lender with whom you’d like to work…
Your lender can sit down with you and look over your financial situation to help you determine how much home you can afford and let you know how to correct any credit problems you may have in order to qualify. Remember, just because your credit may be less than perfect or you’ve just changed careers doesn’t mean a lender won’t work with you.
For a list of mortgage companies with offices in our area, check out my “Local Directory” section!
Also, your credit is everything in today’s world. Be sure to check out these sites for more information on your credit:
