Here’s What To Expect When You Go To Get A Real Estate Loan

Part 3 in a 4 part series. Part one is here. Part two is here.

Mortgages today are much different than they were just a few years ago.  The institutions lending money are no longer interested in pretending everyone (bad credit, no savings) can afford what ever they want.  Gone are the days of ‘no down payment stated-income loans.’  If you want to get a loan, but can’t prove all of your income on paper, you’ll need at least 5% of the purchase price as a down payment (you’ll also need money for closing costs & other purchase related expenses).  For many borrowers there are still 0% down, and 3% down FHA loans available.  The best way to determine what programs you can qualify for, and what sort of savings you do or do not need, is to meet with a loan officer with access to many mortgage companies.

Credit, while not the only qualifying factor, is an important part of the equation.  Here are a few things to know about credit.  Monitoring it on any of the web sites of the tri-bureaus is good (Experian, Equifax, Trans Union).  However, they are now using a ‘consumer version’ of the scoring system, based off entirely different numbers than most lenders will see when they pull your report.  Meeting with a loan officer or mortgage consultant you can get a ‘real’ copy of your credit score and report.  In most cases this will cost you less than it will on the consumer web sites.  I generally pay this small cost for my prospective clients.

The best way to figure out what where you stand & what your options are is to meet with a mortgage consultant as soon as you begin thinking about shopping for a home. Bring as much documentation as possible:

• – Past two (2) years W-2 statements
• – Pay Stubs covering the last (30) thirty days
• – Three most recent monthly bank statements
• – Most recent transaction summary of 401K, IRA, or Mutual Fund Accounts
• – Photocopies of any stocks or certificates of deposits
• – Copy of the purchase and sale agreement
• – If you are currently renting….either 12 months canceled rent checks or the name and address of your current landlord
• – If divorced…a fully executed divorce decree
• – For a refinance…a copy of the deed, and most recent tax bill
• – A letter of explanation for any known credit problems
• – For self employed borrowers, employed in sales, paid by commission, or owns rental real estate:
• – Two (2) years signed personal tax returns – including all schedules
• – If self-employed through a corporation, last two years corporate returns as well as a year-to-date profit and loss statement and balance sheet

Be prepared to get ‘financially naked’, and please be honest with your loan officer.  Your L.O. is first and foremost working for you.  If you tell them how it really is and work with them through the process, a plan to accomplish your goals can be executed.  If you’re making things up, it will come out before your purchase closes (or does not), and you will both have wasted valuable time & energy. 

I can not stress the ‘team effort’ here enough.  You, your Realtor, and mortgage consultant all need to be on the same page.  Communicating efficiently and all understanding the common goals and realistic situation of what you’re trying to purchase, and what obstacles need to be managed help you accomplish your goal within your time frame. 

Things that need to be known by you, your Realtor & your loan officer:

• – How long you plan on owning the home
• – If you plan on owning it by yourself or with someone else
• – Whether you plan on living there as your primary residence, a vacation or second home, or if you’re strictly buying it as a rental
• – If you own other property already, where it is & what you plan on doing with it (selling, renting out, etc.)
• – What your projected family, occupational/ income status is over the period you plan to own the home
• – What sort of liquid reserves you plan on using as down payment/ settlement cost
• – How much you can afford & what type of loan programs you’re comfortable with (30 yr. fixed, 5 yr. fixed, interest only, 2 yr. pre-payment penalty, etc.) – Make sure you understand your loan!  Loans can be complicated, and for most of you this will be the largest purchase you ever make, DON’T HESITATE TO ASK FOR EXPLANATIONS! A good mortgage consultant will be happy to explain everything until you feel comfortable.

DON’T EXPECT YOUR LOAN OFFICER TO WORK FOR FREE!  As I mentioned earlier, loans can be complicated and stressful.  There is nothing wrong with comparing rates and making a choice that seems fair to everyone.  If you can’t trust the guy that quoted you the lowest rate; or if you don’t fully understand the loan he presented, it may go up on you two years later (Look at all the empty foreclosed homes in the valley).  If it seems too good to be true, it probably is.  You can get a great deal on a heart transplant on the side of the road in Mexico, but when you’re dealing with an issue that’s this important to you, it’s OK to pay someone to do a good job.  Make sure your L.O. can get you a solid reference, and that you feel comfortable communicating and working with them. 

Working with them. Yes. You’ll be working together to get this deal done.  It’s not just the initial consultation you’ll be involved in.  As your put in an offer on a home and your loan moves forward, your L.O. may need updated bank statements, verifications of employment from your work, and other things.  Please respond to their requests as soon as possible, a good team effort is the best way to ensure you end up relaxing in that dream home as soon as possible!

Because it is a buyer’s market these days in Las Vegas, you may be able to work with a good Realtor to find and negotiate a purchase contract that will pay most if not all of your closing costs.  By doing this, even if you are not someone with perfect credit and fully documentable income and thus need to have a down payment saved, seller paid closing costs can help ease the savings needed to close your transaction.  Again, this is something that everyone involved (you, your loan officer, and your Realtor) all need to know.  If we’re all on the same page here the Realtor can search for properties that note the seller is willing to pay closing costs, and the loan officer can shop around for lenders that allow closing costs up to the amount you need covered. 

The most important things to remember about the financing side of getting you into your new home are the following.

• – Start early! Don’t wait to speak with a lender, getting the numbers together may not be the most exciting part of the process, but it beats finding your dream home only to loose it because you can’t afford it, or because a more prepared buyer put in an offer competing with yours.  The sooner you contact a lender, the better your process will be.
• – Working with a broker, or loan officer from a brokerage will allow you to access every bank, and every sort of program available to your situation with one application, and one credit pull!  Brokers can also usually structure your deal with more flexibility (lower rates or lower closing costs) than a bank can, putting together a specialized plan for your situation, not the bank’s.
• – Be as specific and honest as possible with your loan officer.  Ask questions until you’re satisfied.

I hope you’ve found this post to be helpful.  If there is anything you don’t understand or would like specific help with, feel free to email me at [email protected], or call me directly at 702–686–2036.  Another benefit to working with a full-time loan officer as opposed to a bank is you can reach us on nights & weekends.  If I don’t help you find and close the best deal for you, I don’t get paid.  If I don’t do a great job, you won’t refer me to your fiends & co-workers.  That’s how we do business here, we’d love to do a great job for you!

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