When you buy a car, do you talk to the car salesman about all the options you want, have him/her help you find the perfect model, negotiate the price you want to pay, only then to figure out how you are going to pay for it? If you aren’t paying all cash, you need financing. Sure, the dealer can point you to their finance department, but do you even know if you are going to qualify for a loan? If you qualify, is the dealership going to give you financing at the best terms? Maybe after all that work, you find out you can’t afford that Porsche Cayenne and you must start looking at Honda Pilots… All that time and effort wasted and you are back to the drawing board.
Buying a home is similar, but on a much larger scale. If you want to buy a home and you need financing to help with that purchase, going to a real estate agent first is like going to that car salesman. Unlike cars however, homes have an even bigger impact on your life. Buying a home will not only be your largest debt, but it is an appreciating asset that will most likely be the biggest investment you will ever have. Mortgages will most likely affect your financial plans for the next 30+ years and have a significant impact on your taxes. If you want to buy a home and need financing, let me give you three reasons why you should talk to a mortgage advisor before a real estate agent.
1. Real estate agents know houses, not loans. Real estate agents know properties, home values, and niche neighborhoods. They can negotiate on your behalf on a home purchase contract and many other things property related, but if you need financing to buy that home, real estate agents can’t help. Since 2008 the mortgage industry has done an about-face when it comes to available loan products, qualifying parameters, and the entire process of getting a loan. It’s a full-time job to keep up with the constantly changing mortgage lending environment and real estate agents just don’t have the resources or time to keep up.
Let me share a very common story. A real estate agent called me the other day when a home went up for sale in the neighborhood his client was looking in. He explained to me that his client was a long-standing teacher in the community with good pay, was currently paying a significant amount in rent (so assuming she could afford a mortgage) and just received a large sum of money that she wanted to use for down payment. They viewed the property and she loved it! They wanted to write an offer to purchase the house and although his client was “pre-approved” online, he wanted a pre-approval letter from me asap to show the sellers his client was a serious buyer. I talked to the client, reviewed her loan and financial documentation, and a very long story short, she didn’t qualify for the financing she needed to buy the home. This brings up reason number two.
2. Mortgages are confusing. This is why I have a job. What you “think” you will or won’t qualify for may not be the case at all. This is because most qualifying guidelines for loans make sense to banks and are not always logical to consumers. Also, no one cares what that online form you filled out says. Until all your financial situation is reviewed by a mortgage adviser, your online “pre-approval”, or rejection, is about as believable as Santa Claus. No offense to Santa, I think his idea is wonderful, but bottom line, he doesn’t exist. A minor item in your actual financial paperwork could cause a challenge for financing and a small change in application structure or loan product can make you qualify. A real-life mortgage adviser is the only one that can explain those differences to you and can keep you on track for your home buying dream. They can also refer you to a real estate agent once you are pre-approved if you don’t know one. They work with a few hundred every year so they’ll know the good ones.
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.” ~Freddie Mac
3. Streamlined Advantage. Many markets around the country are in an inventory crisis. The number of buyers searching for their dream home greatly outnumber the homes for sale. This has led to a competitive buyer marketplace. Buyers need to be able to act fast and have their offer stand out. When you understand your financing, how much you can/want to afford and what loan product you are going to use, you hold the upper hand in your home search. You can contact a real estate agent with your pre-approval, exact price range and loan product and look for homes with laser focus and efficiency. You will also be able to act immediately and with confidence when you find that perfect home. This will not only help show the seller that you are a serious buyer, but will greatly reduce the anxiety, stress and confusion that is normally associated with the home buying process.
Ask anyone who has bought a home within the last 5 years, the majority will have some sort of financing horror story. Then ask those horror stories if they talked to a mortgage adviser or real estate agent first. I think you know where I’m going with this. The most complicated part of home buying is the financing aspect. Get that out of the way and get your financing plan in place with a mortgage adviser first, then talk to a real estate agent to help you find that perfect house with your perfect, pre-approved financing. Make your home buying story a happy one.
Don’t know a mortgage adviser? I can help you personally or help you find one in your area.
About the Author:
Sarah Lindsey is a home loan adviser with over 12 years of industry experience. Her core values are based on one simple approach – provide clients with trusted expertise, personalized information, specific to their needs. Sarah currently serves as a Vice President with Synergy One Lending, is a regular guest on the television show, The American Dream with Craig Sewing, is a resource partner for the San Diego Chapter of the Financial Planner’s Association, is a board member for Junior Achievement (a non-profit focused on bringing financial education to all school age children) and can be heard on the radio station AM 1170 advocating consumer awareness on financing.