5 Reasons to Speak to a Lender Before Home Shopping

Article by P2PB Agent Adrienne Lazovick

One of the roles your Realtor will serve to you as is an adviser, and he or she would be doing you a disservice if they weren’t properly prepping you to buy a house. Almost every survey, article, and realtor (if they know what they’re doing) will tell you that one of the most important things a first time home buyer should do before shopping around is to speak with and get pre-approved by a local lender. And I stress “local” because in a competitive market and especially in the South Bay, this could be the difference of whether or not your offer gets chosen. And let’s be honest: rejection sucks.

So, listen to your Realtor and wise up. Here are 5 great reasons why every buyer, especially first time home buyers, should talk to a lender before taking romantic strolls through open houses on the weekends:

1. Finding out what you really CAN and CANNOT afford.

Talking to a lender will help you to set realistic expectations. Consider this scenario: you walk in to the open house of your dreams to soon after find out that it’s just out of your financial reach. You don’t want to put yourself through that emotional torture, now do you? But also consider the opposite: It’s very possible that you may be able to comfortably afford more than you expected. With the wide array of loans and products available, factoring in your additional expenses in home buying, your lender may be able to provide you with some surprisingly good news.

2. You’ll look very attractive to sellers (in a strictly-business, just-want-to choose-the-right-buyer, kinda way).

Whether it’s from a sellers viewpoint or from that of a Realtor you may want to work with, having that pre-approval will make you shine. A pre-approval letter will show that you are serious in your search, no window shopping or monkey business. As far as the Realtor is concerned, they will be much more inclined to start working like a champ in finding your dream home. And to a seller, this serves as proof that at the close of a time and energy –consuming escrow that you can actually provide the dough.

3. You’ll be organized and prepared to make an offer, and beyond. 

Trust me when I say that there is a lot of paperwork involved in both the home buying and loan process. Loan officers will want to see years of tax returns, bank statements, and proof of where your money comes from. You’re going to want have this in order and ready to rock at the time you find the right home, rather than swimming in a sea of documents when given an offer deadline. Not to mention, having all of your ducks in a row will cause less complication during the escrow period, and a less chance that a seller will back out due to loan complications.

4. You can still shop around for best rate and fit. 

Getting a pre-approval from a lender does not mean you are married to that particular lender. You can still shop around and look for a more competitive rate, but best to do your comps all in one day considering rates vary on a daily basis. It is also very common for one lender to send your documents and info to another lender upon your request. Furthermore, if all of your lender apps are done within a certain time frame, the credit bureaus will count them all as single inquiry and should only affect your credit once (I believe the grace period is about 2 weeks, but speak to a mortgage professional for a definitive). So for those who are concerned that your credit score will take a heavy hit, try not to worry too much.

5. Getting an idea of what your cost to close may be. 

I’m sure you are well aware that you will have to provide a down payment, but you will also have to pay for costs associated with the closing, and things can definitely add up. Typical expenses may include application fees, credit report fees, mortgage insurance, title insurance, and discount points (1% of the mortgage, or $1,000 for every $100,000). Although the seller will be responsible for his or her own costs as well, you don’t want to walk in to the process with blinders on and be in financial shock come game time.

So, like your mother always said, listen to your Realtor and get pre-approved. You’ll thank me later when you have less battle wounds after your first-time home purchase experience.

If you have any further questions about the home buying process or are looking for local lender referrals in the South Bay, please reach out to me at adrienne@piertopierbrokers.com.

Michael Maughan