Frequently we hear from clients, friends or simply overhear random conversations about how frustrated people are with the home buying process, particularly the mortgage loan portion – which is a pretty big portion! The three most important things to know about real estate are location, location, location, right? Well in the world of mortgages it’s preparation, preparation, preparation.
When I hear the irritation of those going through the mortgage process I have been able to come up with a few tips that if the buyer had known ahead of time would have saved everyone quite a headache.
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Be prepared for everything! Gather all of your financial documentation, the more the better! Lenders typically require a basic list of items from you during the application process. Of course there will likely be some off-the-wall items that no one could have seen coming but as a rule, remember the “two’s”. Two years of bank statements, two years tax returns & w-2’s, two years job history, two most recent pay stubs, two most recent investment statements…you get the idea.
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Find a guide to navigate you through this; and no I don’t mean a Realtor! The perfect Realtor can help you to all ends of the home buying process, but how do you know how much you can afford to spend on a house or how much a lender is willing to give you? That’s right, you don’t! Your first stop should always be with a mortgage professional. You may want to talk with a few before you decide on working with one and that’s perfectly fine. You need to be sure you’re working with a knowledgeable professional because this person will be the one fighting in your corner to get you into that new home.
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Try not to freak out! There will inevitably be a back and forth between you and your loan originator (see why I said you should be pick a good one!). You’ll likely be asked uncomfortable questions and asked for seemingly obscure documentation. Don’t get upset! The loan approval process is just that, a process. Your loan originator answers to an underwriter at the lending institution, and that underwriter has to follow the rules of their company as well as a myriad of federal regulations and standards in order to approve you for the loan. Unfortunately obtaining a home loan isn’t as simple as asking the bank nicely for the money and promising to pay it back – I wish! Keep calm and don’t be afraid to ask questions.
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As much as you may want a new home, the bank also wants a new customer. Somewhere there about halfway through the process when you feel like you’ve gone through the gauntlet of bankers, lenders, underwriters, realtors, sellers…and just about when your hand feels like it may fall off from all of the paperwork and contracts you’ve been signing, suddenly you’re grilled on why you had such a great paycheck bonus two years ago, but a slightly smaller one this year – don’t give up! Remember that the lender isn’t against you, they really do want to approve you for the loan, it’s just a matter of justifying your ability to repay the debt.
I could probably go on forever and would be happy to if there are any particular questions, but those above are the most frequent pieces of advice I find myself giving. Homeownership is a great thing. Though the loan process might be a bit painful just remember, it may be the last time you ever have to do it!