Choosing a Lender
An important ingredient in the home buying process is knowing how much you can afford to invest in the purchase. In fact, getting a loan approval is the first step.
All lenders work from the same index in terms of current interest rates, so it’s unlikely that one lender can promise you a significantly lower rate over another lender’s interest rate quote. However; your credit score can affect the amount of interest you’re charged on a loan. With that being said; your focus when deciding on which lender to use should be on the following:
Is the lender local?- if something goes wrong along the way such as the lender going into bankruptcy or AWOL then what do you do? This is really a case of deciding if you want to use a lender with a local physical presence or are you okay with using an online company.
Have you or anyone you trust previously used the lender to purchase a home?- Consider the actual experience of the transaction, was it a good one? Also, how long ago was it?
Does the lender work on weekends?- if we find the home you want to buy and it’s the weekend is the lender available to provide an updated loan approval for the seller if needed?
How responsive is the lender?- if you have a question that affects the home you want to make an offer on, such as how much will your monthly payment change if you were to buy a home that is ‘x amount’ over your projected purchase price, and the lender is slow or unavailable to respond; you may miss out on that particular home. There are also financing and appraisal contingency deadlines built into your contract that the lender should stay one step ahead of, in order to avoid you defaulting on your responsibilities within the contract.
Is the lender familiar with the loan product that best fit your needs?– For example; if you’re using a 203k loan, or utilizing down payment assistance or a particular housing grant; has the loan officer personally and successfully closed these types of loans in the past? If not; use a different lender that is familiar with the loan product you’re using.
What are fees associated with obtaining a loan?- In essence, how much is the lender charging you to obtain financing? These fees are a part of your closing costs so it is super important to know all of the numbers.
How long will it take to process your loan?- Knowing the number of days the lender needs to process your loan before we can close, helps with negotiation when presenting your offer to the seller.
Working with the right lender affects everything because for most people financing is the biggest hurdle to overcome when home buying a home. As you build your team of professionals it is important that you have the right people working with you to guide and support you across the finish line.
You can arrange for a Mortgage Pre-Approval with your bank or other lender, or by working with a good mortgage broker. Over the years I have built my own team of real estate related professionals which includes a select group of preferred lenders that past clients have successfully used. If would like to be referred to any of them please let know.
How Much Home Can You Afford?
Banks and lenders use specific criteria to determine how much of a mortgage they’re willing to offer you. They look at your income, expenses, credit history and employment status, as well as the down payment you plan to make on a home. It may seem like a scary process, but it is actually straight forward. Typical documents required to complete a loan application includes 2 years tax returns, pay stubs, bank statements and a copy of your driver’s license or state issued picture ID. Once your application is processed, the lender can issue a loan approval letter which is good for 90 days.
By knowing what you can afford, you can confidently shop within that price range.
Have questions about arranging financing? Contact me to speak with one our lender partners. What you should know before applying for a mortgage.