Home Buying Process Part 2: Finding a Lender

Finding a lender and understanding your financial situation are critical when buying a home.  It is very common for home buyers to start looking at homes before talking with a lender but it can be a HUGE mistake.  Most people will go to a website and figure out a manageable monthly payment and then use that as a guide to begin searching homes.  In reality there are many factors and many options when financing a home.  The only people that are qualified to help you with this are a mortgage broker or a loan officer from an institutional lender.  Realtors can advise on where to go and what options may be best but they do not understand your credit history or your tax returns.  Therefore, it would be impossible for a realtor to speculate what your interest rate will be in the end.  Some people may even tell you to talk with a lender before finding a realtor.   That is not a bad idea but a good realtor will help you find a good lender to get started.  There are many things you will need to understand when searching for a lender and a real estate professional can help you find the best people to speak with about a new loan. In general, a good realtor will explain the process to you before meeting with a lender because the more you understand about the process the better decision you will make.

First, you need to know that bigger is not always better.  Many people have an account with a large bank like Bank of America or a similar size bank, but that doesn’t mean you have to use them for a mortgage.  You need to work with people that are experienced and do a great job for their clients.  Sometimes the best loan officers don’t always stay with the big banks and that can happen for many reasons.  For example, bigger banks have recently been much slower when it comes to under writing and that can add frustrations to an already tedious process.  Second, you only need to meet with one or two lenders.  If they are referred to you by a professional than you should feel good about working with either one of them.  You don’t want to go around and meet with 8 lenders before making a decision.  In most cases a lender will pull your credit score when you meet.  And if you meet 8 lenders than your score will be pulled 8 times and that will lower your overall score.  Furthermore, there will not be a huge difference in rates between two very good lenders.  You may find a better deal on the fees or a better program, and sometimes you may just get along with one more than the other.  Third, DO NOT USE AN INTERNET LENDER!  You need to work with someone in your area and someone that you can keep a relationship with moving forward. Amazon Prime is great and everyone loves the internet but it is not a good place to get a loan plain and simple.  Lastly, get your documents in order before making an offer.  Any lender is going to need a lot of documentation from you to underwrite the loan.  For example, tax returns, paychecks, W2s, leases on existing properties, your net worth and the list goes on.  It is better to get this done early because it will speed up your loan.

In the end, you will enjoy the process much more if you locate a realtor and a lender in the beginning.  The loan process can feel overwhelming due to underwriting and government regulation.  It is tremendously helpful to have two professionals guide you through it and provide you with a realistic expectation of the process.

If you have any questions or real estate needs, please don’t hesitate to contact me or visit my real estate brokerage firm, 5 Market Realty.