Securing a Home Mortgage: A Crash Course

Incredible amounts of time, money and research go into the home buying process. Most of this time is focused on the finding, researching, and inspecting the actual real estate asset. While this is very important and frankly how I spend most of each day assisting my clients, time needs to be also spent on the financing of this investment.

The basics of the process are finding a lender, locking in a great rate, and deciding what amount you are comfortable financing that yields a monthly payment that is right for you. If you are now or in the future will be buying a home please take a moment to read and integrate some of these suggestions and tips into your financing formula.

So how does one find a lender? Well asking your real estate agent for some good names is a great start. Your agent works for you and how the lenders that he refers performs is a reflection on him/her and your future business and referrals are dependent on him/her doing a great job for you. Thus, an experienced agent has been through the process with many different lenders and has narrowed their list down to the ones that are hardworking, honest, go the extra mile, have good rates, have good products, are kind, and who may fit for different clients and circumstances. Make sure to ask your agent for a couple of names and call a couple to see which one has a personality that works with you and also to get a couple of quotes on rates and products. Do not get quotes from many lenders as each time they pull your credit it is called a ‘hard pull’ and too many can cause your credit score to go down.

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Often big banks are not the best way to go for many people. Local banks or regional or national mortgage brokers that are independent of a bank can often give you more one on one attention, meet with you in person, know your local market, be more creative with their offerings, and move more quickly when there is a bump in the road or something out of ordinary. This can be especially true with people that are recently self-employed, people that have recently started to rent out an asset that was formerly a personal expense, etc. Besides, often the smaller lenders will be selling your loan to a large bank soon after closing, so you will likely be paying your mortgage to a large bank and have the large bank level of telephonic customer service soon after closing.

Rates change daily, sometimes more than once a day! Start watching rates early and often. There are a good number of lenders that offer programs where you can lock in the rate now and if the rate goes down at all or by a certain amount you can float the rate down to the lower rate at least once. But you have the protection that if the rates go up you are not stuck with the higher rate. A small increase in the rate can mean tens to hundreds more a month, which over 30 years can be a substantial cost.

Be a hawk about your credit score! One late payment on a credit card can stay on your credit report for 7 years and drop your FICO score by 60 to 110 points. Also try not to open a new credit card or increase your balance at least 6 months before applying for a mortgage if it can be avoided.

Other things to do when you are getting ready to get a mortgage are: keep originals or have access to all of your bank statements, pay-tubs, tax returns and other important financial documents; provide your Earnest Money Deposit from your own personal bank account or acceptable gift funds; and decide early to either file taxes or file an extension and do either early so that it is registered with the tax authorities (for rental income and self-employment income the banks will want to see it through taxes, especially if you don’t have at least a two year history).

There are other things you should avoid doing during the process: change jobs/employer before asking if it will impact your loan; deposit monies outside of your payroll deposits (especially cash or personal property sale) as they will often require substantial documentation as to it’s source; don’t make major purchases before or while under contract (ie new car, furniture, appliances); change your legal name; take substantial vacation or unpaid time off before closing.

I highly advise talking with a real estate agent about your particular circumstances and having them in your corner during the process. They can be your advocate with any lenders you choose and help to make sure that the process goes smoothly and that you get the best deal you can. I am available to anyone that has any questions, needs, concerns, etc. about this subject and other real estate related subject. Happy mortgage hunting!

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