Getting a mortgage can seem like a daunting process, but if you follow these 5 tips before you decide to buy your next home, your process is going to be a walk in the park!
Tip#1: Credit is KEY
I am sure that you have heard that your credit score is important when getting a home loan, and boy is it the truth. An unfortunate fact of lending in America is that credit scores rule just about everything. It is how the mortgage underwriters measure the risk associated with your specific mortgage. I don’t want to bore you with technical insights, but their thoughts are essentially, “The lower the score, the higher the risk. Therefore, this person gets a little bit higher rate.”. So, you’re probably asking “Okay Tony, how do you keep your credit up then??”. A few big ones are; 1. No late or missed payments 2. Credit Card balances need to be 30% or less than the limit 3. No collection accounts on your credit. Now, can you still get a mortgage if your credit score isn’t perfect? OF COURSE! We have been doing this for 20 years, so many times if your credit is a little low, we can give you a road map of how to get it higher! All it takes is a phone call!
TIP#2: NO LARGE DEPOSITS
During the Mortgage process we are going to need to take a look at your last 2 months of Bank Statements. Make sure that if there is a random large deposit in there (More than $1000), that we can explain that large deposit. For example, if you sold a boat, we would explain that by having a legitimate bill of sale, and a copy of the check or money order from the buyer that went into your account. If you don’t have those things, or your bill of sale is written on a napkin (Don’t laugh, I have seen it!) then we can’t account for that, and the process isn’t going to go along too smoothly. Mortgages are a big game of connecting the dots and if you can’t connect them, that speed bump, may turn into a stop sign.
If you really want to get technical and see what Fannie Mae says about this, check it out here: https://www.fanniemae.com/content/guide/selling/b3/4.2/02.html
Tip#3: NO MATTRESS MONEY
Now, I know that many of you do not keep your money in the mattress anymore like your Grandmother, but you may have some extra cash in your safe that you want to use for the down payment on your next home. Not so fast there Memaw! Title companies (The person who will facilitate the closing) do not accept cash for down payments anymore. Those years have LONG since passed. It has to come from a financial institution, such as a bank. So if you put that cash in your bank account a few weeks before closing, how can we connect the dots on where it came from? If you want to use that money, make sure you put that money in your bank account months before you are ready to start the process.
Tip#4: You don’t need 20% down
I hear things like “But I thought I had to put 20% down??” all the time from some of my clients on our initial call. This could not be farther from the truth. There are many different products out there for every financial situation. Heck, if you are a veteran, you could buy a $700,000 home with ZERO percent down on a VA loan! Don’t let what you heard from someone else stop you from finding out what is actually possible. There are loans out there that offer very low down-payments and are available to the majority of people. Just give a mortgage professional like myself a call, and see what is possible!
Tip#5: Talk to a Mortgage Professional First
Look, in this age of sites like Zillow, I know that it is very easy to just hit that “More Information” button and you immediately get called by 100 Realtors. I know that you may have a friend or a relative that is a Realtor who will take you out and show you homes without a Pre-Qualification or a Pre-Approval letter. However, in my humble opinion, you are really doing yourself, and your Realtor a disservice by going out without one of those letters. The reason being, without a direction or budget you may find a home you fall in love with, but then later find out you aren’t comfortable with the monthly payment, or worse, you can’t afford it. If you speak with a Mortgage Professional BEFORE you speak to a Realtor, you will be put to the front of the line! That qualification letter is your golden ticket. It tells them that you have spoken with a lender, you are ready to go, and you are serious. Also, many people have to find a home in a short timeline so having a clear path of what your price range is will help you be laser focused to find your next dream home, and more importantly, beat out those other potential buyers!
BONUS TIP: Brokers are better! 😊
This is a shameless plug of course, but it doesn’t mean that it isn’t true! Brokers work for you, and we know how important this process is to you and your family. We do not try to fit you into a “one size fits all” lending box to get you approved. We work with multiple different wholesale underwriters to make sure that you are getting the best rate possible, and that you will close on time. “Extension” is a bad word in my vocabulary! Not to mention I save my clients thousands of dollars on lender fees with each transaction. Many lending institutions will charge you each and every lender fee that they can so that they make the most money during that transaction. I’m not worried about a few extra dollars because I want to be your “mortgage guy” for life, not just this one transaction. Your personal satisfaction is much more important. So, I know you have heard the saying “The grass isn’t always greener on the other side”… well, I am here to tell you that this time, it is.
If you have any questions, please feel free to reach out!