Make the Home Buying Process Fun
April 8, 2013
Buying a home is fun. And if you don’t think it is, it should be.
For the buyers, it’s the delight of finding the right home with the right features to fit their family’s needs. It’s an adventure that leads to an amazing treasure their family will share for many years.
For me, as a lender, it’s always been fun to see the end result. I enjoy going to loan closings when just a few signatures on documents transfer that dream into a reality. This is true whether it is a first-time home purchase or one of many in a couple’s life. It’s always satisfying to help make that transition happen.
Over my 30 years of mortgage lending, we have seen our share of ups and downs. Today’s historically low rates provide an incredible opportunity for anyone interested in buying, refinancing or building. However, recent issues in the housing industry have required more documentation to close the sale. Don’t let that “red tape” take the fun out of your home buying experience. Mortgage lenders are here to help.
That’s because we’re not just bankers or lenders. I also consider us to be counselors, teachers, advisors and partners in the transaction process. The rules may change along the way, but by working together, securing the right financing for the right home can still be a fun and rewarding experience.
Here are a few tips I think will help you when applying for a loan to purchase or refinance a home:
Choose a lender you can trust with your most private information. During the loan process, you will be asked to provide very detailed information about your finances. Would you share that with a stranger? I hope not. Local lenders not only offer the benefits of face-to-face communication (so you can size them up), but can also become your personal advisor in the event you have additional questions. By finding the right lender, you will also find a valuable resource to help guide you through the process. Choose the right lender, and the mortgage process will go smoothly.
Get Pre-Qualified. One of the first questions a realtor will ask you before showing you a home is whether or not you have been pre-qualified. The pre-qualification process uses the same guidelines that a home mortgage would, but instead of establishing a specific loan amount, the lender can offer a pre-qualified amount in terms of a price range of what you might qualify for. Knowing your price range gives the realtor better guidance on how much house you can afford, and gives you a better idea on how a home can fit into your monthly finances. Apply here to get started.
Have all your information ready. Even during a pre-qualification, you need to be sure to include all your financial obligations. Since your lender will pull a credit bureau listing when processing your information, it might also be helpful to obtain a credit report prior to your meeting with a lender. That way, you can review it ahead of time, anticipate questions the lender may have and avoid any surprises when you enter the pre-qualification or loan process. This also gives you the opportunity to “get your house in order” before entering the lending process. To order your full credit report (one report is free every 12 months) visit annualcreditreport.com or call 1-877-322-8228.
Be brutally honest. A good lender will ask questions beyond what is on the credit report regarding your lifestyle or upcoming financial needs. If your car is on its last leg and may require a replacement in the near future, share the details with your lender. The worst thing that could happen is if you obtained the maximum loan amount for a home, and then found out later that you don’t have enough credit room left to purchase that replacement car.
The debt-to-income ratio is your friend. During the loan process, you will discuss your debt -to-income ratio. Simply put, this is how much money you owe in relation to how much money you earn. The ratio is used to determine the best loan option for your needs. However, some people find the ratio to be an unwelcome hurdle in the lending process. Today’s debt-to-income standards are a blast from the past. About 25 years ago, we had very similar standards before they were loosened in the 90s and early 2000s. The looser guidelines may have secured more mortgages for certain lenders, but they also resulted in a record number of foreclosures, bankruptcies and “upside-down” mortgages (where the owners owe more on a mortgage than the home is worth). The “debt-to-income” ratio calculations aren’t just to protect the bank’s investment in your loan, but are also used to protect you from getting in over your head. Remember, the last thing a bank wants to do is to take your home away, so allow the ratios to work to your benefit.
Ask questions. And if you still don’t understand, ask again. Your name on a mortgage makes you responsible for that loan, so you’re entitled to a good understanding of it. Ask plenty of questions before signing any documents. Good dialogue with your lender can help avoid any surprises or misunderstandings later. And if you have to ask the question more than once to gain a good understanding -- do it. A good lender who has your best interests in mind will be very willing to educate you on the details of your loan.
Plan Ahead when Refinancing. If you’re refinancing an existing loan, additional cash to make home improvements may be built into your refinanced mortgage, based on the amount of equity you have in your home. With rates as low as they are today, it’s prudent to consider additional financing for other elements you may want to add to your home. If you need to remodel the kitchen, add a parking pad, replace the deck or simply put your personal touches in place, getting the financing for it at the same time as your home loan makes good sense. After all, the bank already has all the credit information in front of them. If you’re buying and have a new mortgage, you will want to check into whether you have equity enough to qualify for a home equity loan or line of credit to cover your home improvements. Apply here to get started.
One more thing. If you’re a current homeowner who is considering a move in the future, either to down-size or to upgrade your home, right now is the time to do it. Rates won’t stay this low for much longer, and waiting could potentially cost you thousands in interest alone. Apply here to get started.
In the 30 years I’ve been in the mortgage lending business, there have been many changes in the home buying process. The applications have changed, the information requirements have been adjusted, and the underwriting processes have been revised. It’s a learning process, but one that we try to make as simple as possible for our customers.
It must be working, as I’ve recently had the pleasure of assisting a second-generation of homeowners with their mortgage needs after originally assisting their parents.
What could be more fun than that??
Randy Fink is the Vice President of Business Banking and Mortgage Lending for Home Federal Bank. As a Home Loan Specialist, he has been serving the mortgage needs of Home Federal customers for more than 30 years. He currently sits on the board for the Home Builders’ Association and recently served the Sioux Empire Housing Partnership as board member and past president. Through his career, he has received many awards for his leadership, most recently as a 2011 inductee into the Home Builders Association Hall of Fame.
Home Federal offers Personal Banking, Business Banking, Ag Lending , Home Loans, Trust and Asset Management, and Investments. With so much to offer, learn what Home Federal can do for you.