Beginners Buying Guide, Step 1
Buying a home isn’t rocket science, but it’s not exactly simple either. Here’s some basic information on the process. I’ve divided this into six basic steps, with each step getting its own short blog post. They are:
1) Figure out how you’re going to pay for it
2) Decide who is going to represent you
3) The search process
4) making offers
5) what to do once you’re under contract
6) closing the deal
So, without further ado, here’s post #1)
Figure out how you’re going to pay for it.
This may be the least fun part of the home buying experience, but there are a few reasons why it does need to come before you start actually shopping for houses. First, you need to know what you can afford. It’s really a drag to fall in love with a house and then not be able to buy because you find it is just out of your price range. Second, at least in our current market in Denver (2016) you’ll need to submit a pre-qualification letter from a lender with your offer if you want it to be taken seriously by a seller. This doesn’t involve a full loan application; you’ll give the lender basic info about your job, how much money you make, and how much you owe. This information will be verified later when you do the full loan application. Don’t try to sugar-coat anything at this point, or it will cause trouble later on. If you’re planning on paying cash, then you’ll be expected to submit proof of funds along with your offer rather than a pre-qual letter. This can be as simple as a printout from your bank showing that you have the money in an account.
Once you are starting to think getting a mortgage it’s time to talk to a mortgage broker (or two, or three). Be aware that not all lenders are the same. A good broker will take time to talk about your situation and be able to explain the various options available to you; a bad one will just ask for a bunch of your financial information and give you a thumbs up or down. Your real estate broker should have some preferred lenders to suggest based on your situation and the type of property you’ll be looking for. They know who they have worked with in the past that has provided good and competent service. BTW it’s really kind of a waste of time to spend hours shopping around the internet trying to find the best interest rate. Those published prices are guesstimates that may not have much to do with you’ll actually pay. A good, responsive, helpful local mortgage broker can be the critical factor that gets the deal done and avoids a world of stress and heartbreak.
Just to clarify, mortgage brokers and loan officers are somewhat different. If you go in to your bank and ask about a mortgage, they will send you to their loan officer, who will tell you about the types of loans that bank offers and what their requirements are. They work for that particular bank. A mortgage broker will offer loan products from several different funding sources, and those funding sources may have different requirements. If your financial situation is at all complicated you may be better off with a broker, and it may be worth interviewing a few brokers.
You’ll have to give the mortgage lender way more information than you want to. And you’ll probably have to supply it in triplicate. Brace yourself, plaster a smile on your face, and just do it. It will be worth it in the end.
– Jean Bolger