As I have mentioned on my previous post, one thing that stresses me out lately is house hunting.
Recently, the husband and I have started the complicated, stressful and sometimes difficult process of searching for a home to buy. This is my first time and the very expensive investment I will have. I grew up in the Philippines where we have practiced closed family ties. As I have moved here in US 2 years ago, I worked hard to established myself until I find myself ready to purchase my own home.
Unlike most people, I have the advantage to be married to someone who has well over 25 years of experience in the Real Estate and Lending industry. However, even with his experience, he has been retired for several years and things change fast in this business.
I wanted to take some time and let my readers know the 3 most important rules to the Home Buying Process as I have learned. Following these rules will make the process much more pleasant and less complicated.
#1. Find an experienced Real Estate Agent.
As I mentioned, things change quickly. This includes neighborhoods, prices, laws and local regulations. Although some people think they can save money going on their own (especially with all the apps and websites these days), there are critical reasons a good realtor can save you money in the long run. Even with all the property search options on the internet, a good licensed realtor has access to the MLS (local Multiple Listing Service) and often has access to properties that are about to go on the market. In a hot sales climate, seeing a property before everyone else can be critical. Another big reason is the contracts and negotiations are complicated and trying to do that on your own can not only cost you the Home. Mistakes on a contract can also open you up to costly legal issues later in and also prevent you from getting the best deal in the long run.
#2. Consult an experienced Mortgage Broker.
The days when you just go to your local bank for your home loan, long ago passed. Now you can even apply online for a mortgage and even compare rates. The problem with the personal bank option is that you are relying on an often inexperienced Bank Loan Officer who is only familiar with what their own bank has to offer. Although in some cases, they may have great loan options, it is highly likely that there are better options for you out there.
As far as the websites advertising, you can apply to multiple places and they will compete for your business. Although, you do get to check rates with multiple lending institutions, unless you know what the best options are for you, there are risks. Understanding the financial terms they often throw at you, including up front fees (points) and other hidden costs as well as qualifying requirements are critical and shouldn’t be made without knowing what you are doing.
A Mortgage Broker works with multiple different lenders (aka Investors) who have a wide range of loan products, prices and Lending guidelines. An experienced Mortgage Broker will be able to look at your specific situation, finances and long term needs to steer you towards the best loan for you. Remember, even if you don’t live in the home for life, the average person either sells or refinances within 7 years, so even a small fraction on your rate or higher financed fees can cost you thousands of dollars.
Be sure to check online ratings and references for your broker to ensure they have a wide selection of lenders they work with and that their former clients were satisfied. A home is the biggest purchase you will make and cutting corners on who finances it, is not a wise move.
#3. Get a Loan Approval Before shopping for your home.
Many people think they are ready to buy and will often rush out on their own house hunting, or even with the help of an RE Agent and discover that they find the home they love. However, for someone like myself who’s on a budget, there are steps that you have to take first. There are some instances where you are unable to even make an offer of the home because most home owners (or their agents) will not even accept a purchase offer. Unless you already have a Loan Approval (Pre-Approval) Letter from your lender indicating that they have reviewed your credit, income and assets and have determined you are qualified for financing. It is also important to know what your price range is that you qualify for. Once your lender reviews all your details, you will have a clear understanding of how much home you can afford and what fits into your budget as well. Nobody wants to fall in love with a home to find out you either don’t qualify or the home is outside of your budget. You also may find that you can actually afford that nicer or larger home that you didn’t expect.
You may also find when you consult with your broker and they review your details, that there are items on your credit you were not aware of, or that your scores may not be good enough for what you are seeking. Additionally, an experienced broker may recognize that you can qualify for a better loan program, lower rates or fees if you are able to improve your credit scores. This can often be accomplished by making some minor steps to close, pay down, remove or in some cases even open up new lines of credit. Sometimes these are things you can easily accomplish on your own. In some cases your broker may work with or refer you to a reputable credit repair company that specializes in improving your credit scores.
The home buying and loan process can be one of the most stressful experiences there is, but the payoff of owning your own home makes it worth it. By following the above 3 steps I recommend, I can assure you that it will make the process much easier and far less harrowing as well as improving the chances tremendously you end up with the home of your dreams.
As always luvies, after you read this over, if you have questions, you can comment below and I will answer anything I can.