Yeah, that is a bold headline, but it seems like there are a large number of consumers in the market right now who don’t have a freaking clue about how hard it is to get a mortgage right now. I don’t care how great your credit is or how much money you make, it is tough. Underwriting guidelines are changing week to week, if not day to day. Even the most experienced mortgage brokers and loan officers find it challenging to stay abreast of the market changes. I was recently interviewed by nationally syndicated news show First Business X on tightening guidelines.
If you are serious about a home purchase, it is more important than ever to engage a qualified mortgage professional to ensure you have a clear picture of your financing options and if you truly can get a mortgage BEFORE you even think about looking for homes.
I am getting at least two or three calls per week from borrowers who have entered into contracts on properties and are having problems getting a mortgage. Many are well beyond their mortgage commitment dates and may wind up losing their earnest money.
Get Yourself Pre-Approved, not Pre-Qualified
The first step in buying a house is getting yourself pre-approved. I mean really pre-approved. A pre-approval is when you sit down and have a lender formally underwrite the mortgage. A pre-approval means the lender has completed all of the due diligence by evaluating your credit, income, and assets. The goal is to get a formal loan commitment from the lender in writing.
If you haven’t submitted w-2’s, paystubs, and bank statements YOU HAVE NOT BEEN PRE-APPROVED. Pre-approvals take days, not minutes! No bank is going to commit to lend hundreds of thousands of dollars and they haven’t seen a paystub! If your lender is saying you have been pre-approved, demand to see a formal loan commitment outlining the loan “conditions” and signed by the underwriter.
A prequalification is just the mortgage broker or loan officers opinion. All it means is the loan officer feels you have a reasonably good chance of getting a mortgage. However, until the underwriter actually approves the loan, they really don’t know. The problem with pre-qualifications is that they are only as good as the person giving it. Many inexperienced or shady mortgage brokers and loan officers will tell ANYONE they are pre-qualified or pre-approved just to increase their chances of getting your business. Often times, you won’t know until it it too late or you have to take a worse loan program.
Don’t Let Your Greed Bite You
One of the biggest problems consumers face is that they want the “best deal” and there is nothing wrong with ensuring you are getting competitive terms on your mortgage. However, the problem is that consumers often times forget the other side of the equation which is expertise, service, and professionalism.
What consumers often fail to understand is that rate quotes ARE NOT A COMMITMENT TO LEND. Any mortgage broker or loan officer can tell you they have a super low rate or can still do 100% financing. However, the issue is if the loan can actually close? As a consumer, you won’t know this until it closes. You have to put your faith in what the mortgage broker or loan officer is telling you. This is why it is important that you look beyond the interest rate and ensure the person you are dealing with is reputable and can actually deliver what is being promised.
Too many consumers are not balancing the desire to get that best deal with ensuring they can actually get a mortgage. In other words, everyone is shopping on price and not results which is a dangerous position to put yourself in as a consumer when you have thousands of dollars on the line in your largest financial transaction. Buying a home is not the kind of transaction where you need to worry about saving $50 bucks. It is kind of like shopping for attorney based on their hourly rate without consideration to their win/loss record in court. Saving money is important, but sometimes you have to focus on the overall big picture.
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