Top 6 Reasons to Contact a Lender BEFORE House Hunting
Searching for a new home can be an exciting time. The right location, the right neighborhood, the right features – these are all at the top of a potential homeowners list. But the last thing you want is to find your dream home and then discover it’s well out of your price range. So we asked our Lender buddy Keith Harris to break down why it’s so important to speak to a Lender (and get pre-approved) before you start house hunting.
Know Your Price Range
You can get an idea of what you can afford based on monthly income and monthly debt. Most loans have a maximum debt-to-income ratio for qualification purposes. The mortgage industry uses a borrower’s GROSS monthly income as a basis for this ratio. Most borrowers don’t know their monthly debts and usually think it is higher than what the industry may calculate. For example, if a borrower has 3 credit cards with a total outstanding balance of $900, what is their monthly debt? Many consumers might think their monthly debt is $900. In reality, it would be the total of the monthly minimum payment for all three cards and could be as little as $25 per card – or $75.
Know Your Credit Issues
Once a credit report is run, a number of potential issues may surface. You may have a score that is preventing you from qualifying for certain loans due to a creditor reporting inaccurate information on your credit report. You may have a high balance on a credit card that is impacting your credit score. If you need time to remedy these issues, you can address them early on so that a purchase settlement is not delayed.
Loan Programs
There are potentially many loan programs available to you as a borrower. A sample list may include Conventional, High-Balance, VA, FHA, VHDA, USDA, Jumbo, primary residence, investment properties, etc. Some of these require little or no money down, whereas some may require a minimum down payment of 20% or more. It is not fair to assume that your Realtor will know all of the requirements for loan qualification. Perhaps you had a short sale 3 years ago – if that’s the case, you may only qualify for an FHA loan based on that information.
Have a Competitive Edge
You may have a competitive advantage over other buyers if there are multiple offers on a property. If you have filled out a loan application and your lender has run your credit report, you can obtain a conditional loan approval letter from your lender. If you are interested in a sought after property, you may be able to submit an offer with a closing date weeks earlier than if you had not spoken to a lender. The approval letter can also be strong enough to convince the seller that your offer is the best and safest of all the competing offers.
Be More Efficient
Your lender can tell you all of the information that may be needed to process and approve your loan. You can begin gathering this information ahead of time so that the loan process can be as efficient as possible.
Less Stress!
If you need to liquidate funds for closing, obtain a gift from a family member or provide documentation that is not readily available, you can be made aware of these needs well in advance. We all have enough stress in our daily lives to not have to have added pressure of trying to get qualified for a loan in a short period of time.
If you’re thinking about house hunting and would like to know more about prequalifying for a loan, contact Keith Harris at 703-259-0788 or apply online here.
Keith Harris at Intercoastal Mortgage Company
NMLS ID # 838973
Company NMLS ID # 56323
(www.nmlsconsumeraccess.org)
Intercoastal Mortgage Company is an Equal Housing Lender.
