When Purchasing A Home, Where Do I Start?

I hear customers saying all of the time, "what do I do first?". This may not surprise you coming from a mortgage professional, writing on a blog called Florida Mortgage Pro, but the absolute first thing that you want to do is talk to a mortgage professional, even before a Real Estate Agent and here is why.

Start With a Mortgage Person?

I believe that you should start by seeing a mortgage professional for the following reasons, and I believe that many Real Estate Agents would tell you the same. Speaking to a mortgage pro first will have many benefits, the following are just a few.

1. Realistic Expectations: Nothing makes the home buying process more frustrating, than seeing a house that you love, only to find out it is above your price range. Every house that you walk through afterward is compared to the house that you loved, but couldn't afford. It is likely that any house with similar features will be similarly out of the price range, and therefore any house within the price range will be missing features that you love about the house you cannot afford. It is better to look know what your price range is, and look at houses you can afford. Your loan officer can also give you the monthly payments for different loan amounts, it may be that you qualify for $300,000 at 100% financing, but you are only comfortable with the monthly payment on a $150,000 loan. If that is the case you don't want to spend time looking at $300,000 properties, but you won't know that for sure, until you speak to a loan officer.
2. Pre-qualification or Pre-Approval: You are going to need at least a pre-qualification letter from a lender before any listing agent will take an offer you submit seriously, so it is better to have the letter ahead of time in case you quickly find a house that you love. Also a lot of the more experienced buyers agents don't want to spend a lot of time with you until you are pre-qualified as well and for good reason, if you cannot get a mortgage than you are wasting your own time as well as their time. Another benefit of seeing you mortgage professional first is, that if they offer pre-approvals like Freedom Mortgage does, you can obtain a loan commitment before you identify a property, this tells a seller and listing agent that they do not have to worry about accepting your offer only to have it fall through because you are unable to obtain financing. A pre-qualification letter means that a loan officer thinks he can get you a loan, a pre-approval with a  loan commitment means that an underwriter has said that you can have a loan based on your information.
3. Know Your Loan Options: Your sales contract is going to set the maximum amount of financing that the seller is willing to accept, your mortgage professional will be able to discuss with you the different loans that you qualify for and in your situation is it better to go with 80%, 90% or 95% financing, what are closing costs likely to look like? Are you a veteran, eligible for the VA loan? Is an FHA loan or Conventional loan better in your circumstances? You may want to take advantage of the USDA program and their favorable terms, but the program is not valid in all areas, you don't want to look at houses that will not qualify based on their location. These are questions that your loan officer will be able to answer and it helps to know them ahead of time, to make sure you are being effective with your time looking at houses.

While your real estate agent is going to be the person to help you find the house of your dreams, it is always wise to make sure that the house of your dreams, fits within the budget of your reality first. The only person that is going to be able to help you figure that out is your mortgage professional, especially in the market we are in right now with the interest rates being as volatile as they have been over the past few months.

What Documents Will I Need?

Your loan officer will be able to tell you exactly what documents their lender(s) will require but here are a few items that are pretty consistent across all lenders

1. Income Documentation: The days of "this is how much I make , take my word for it" are over, any income that is used to qualify you will have to be verified, Here are some quick guidelines.
1. Plan to bring you most recent paystubs at a minimum and all w2s and 1099's from the previous year, it is always a good idea to provide your loan officer with the previous years tax returns as well.
2. If you are commissioned or self employed, 2 years of tax returns, including w2s and 1099s
2. Asset Documentation: The days of "this is how much I have in the bank, take my word for it" are over, any assets you use for purposes of paying a down payment or closing costs are going to have to be verified
1. Most Recent Bank Statements
2. Statements for any investment or retirement savings that you will be drawing from for down payment or closing costs
3. Photo ID: Passport or Driver's License are the best.

Typically that is enough to get you started, but your loan officer will be able to walk you through any additional information that he or she may need.