Buying A Home? Contact A (Good) Lender First

Purchasing a new home is very exciting.  But, be careful of getting the cart in front of the horse.  There are many moving parts to this complex transaction.  The first thing you should do is contact a lender to get this critical financing piece in place.

Most people immediately want to start looking at homes.  Real estate agents are certainly willing to help you since they are hoping to get a commission out of a successful transaction.  It will be very embarrassing if you spend a few months looking at homes only to realize you were never in a position to purchase a home in the first place.

To combat this, contact a lender early on.  They will research your income, debt, savings, and credit.  Banks check these items when determining the size loan you qualify for.  This will give you an idea of what price range homes you should be viewing.  It can be demoralizing getting your heart set on 4,000 square foot mansions when your budget limits you to more modest 2,000 square foot homes.

The lender may discover faults in your credit report.  When I was in the Air Force, we wanted to send a former coworker a birthday gift.  We tried looking her up on the military’s internal email address book.  Turns out there are over 10 women with the same first and last name as her.  We were able to narrow it down because we knew she relocated to an Air Force base in Florida.  Similarly, you may be getting the blame for someone else’s bad credit because you have a similar name. Or, it could be something more nasty like someone deliberately opening a credit card under your name.  Then they go on a shopping spree and stick you with the bill.

If your credit is preventing you from purchasing a home or limiting the size of loan you qualify for, you can repair your credit.  It takes discipline and time to pay down your credit card balances, overcome derogatory remarks, weather hard credit inquiries, and develop a payment history.  Credit repair is a complex topic all by itself.

A lender can also help you research the various loan options that are available to you.  If you make a large down payment, you commit yourself to a smaller monthly loan payment.  But, with the historically low interest rates, you may want to take out a larger home loan and use the cash to pay down higher interest rate credit card debt.  When you are a home owner, having spare cash sitting in your checking account can also come in handy for home repairs or improvement projects.  For many buyers, scraping together the funds for the down payment and closing costs is a struggle.  A low down or zero down payment loan can help get you into a home much quicker.  A lender can help educate you on your options.

Don’t lose hope if the first lender says you aren’t in a position to purchase a home.  You can check with other lenders.  Each loan officer has different programs available to them.  Just because one lender says you are not able to purchase a home does not mean there is no hope.  The next lender will have different programs available to them that may work for your situation.

Each loan officer is an individual.  After meeting with a loan officer, you may realize you don’t get along with them.  You are free to select another loan officer that has a personality or attention to detail you find more to your liking.

Purchasing a home is a very complex transaction.  Once your offer is accepted, you have entered into a legally binding contract.  Be careful getting too far along finding your perfect home only to realize you can’t get the financing.