Many buyers don’t think they need to speak to a lender until they are “ready” to purchase a home. In fact, a buyer should actually start working with a lender well before they think they are ready to begin making offers.
When it comes to finances we have been trained as a culture to be very guarded and secretive about our money and ability to obtain loans and credit. If you are considering making the biggest purchase of your life, a home, start working on financing early.
- Speaking with a lender does not cost anything. A loan officer does not get paid until they close your loan. This means you can begin working with someone and will not pay up front. The loan processing fee is included in the closing costs when you purchase a home.
- Cleaning up potential lendability issues takes time. There are a laundry list of things that can inhibit your chances of obtaining a loan such as average credit, new job, lack of credit history, and so on. Your lender can provide you with strategies to increase your lendability and loan options.
- Determine the right purchase price before home shopping. What a lender says you can afford and what you want your payment to look like may very well look different. Your lender can run sample scenarios at different purchase prices and down payments to finalize a comfortable price point.
- Learn about the various loan options and down payment possibilities. Buyers with higher credit and more down will qualify for conventional financing. Veteran’s may opt for a zero down VA loan. Buyers with more limited funds may qualify for a federally backed FHA loan for as little as 3.5% down.
- Avoid falling in love with a home you cannot afford. If you start shopping before your finances are squared away you may be looking at the wrong price point. Although many buyers have a sense of what they can afford it’s nice to confirm with an expert. Especially so you can determine the payment is where you want it to be.
- An offer without a pre-approval letter from a lender will likely not be accepted. In my fast paced market I do not submit offers without buyer pre-approval. In fact, I go a step further and have my buyers pre-underwritten which is a stronger lending guarantee. Without a pre-approval you and your broker will be scrambling to gather paperwork and find a lender if you make an offer before being qualified.
Working with a lender ahead of time will save you time and frustration when you do make an offer on a home. Most lenders can look through your finances in a matter of hours. Be prepared to provide two years of tax returns with W2’s, two or more pay stubs, and several months of bank statements for both checking and savings.