MONEY Makes the World Go 'Round
At the eleventh hour, the lender that promised the best deal may not be the best lender if the loan doesn’t close on time, or GULP, at all...
All lenders are not created equal! What is a prequel vs. a preapproval? How can you find the right lender and how can I shop around for the best deal?
Our agents have the inside scoop on what you need to know when getting financing and can give you inside information that is REALLY essential for a smooth transaction and for saving you money.
DON'T GET BLINDED BY THE PROMISE OF LOW RATES
A majority of the homes we’ve sold involve buyers who get a loan for a portion of the purchase price. We’ve seen it all – good lenders that close without incident at the rate and fees promised and bad lenders who cannot deliver on what they’ve promised.
Your entire deposit may rest on the shoulders of your lender, and if they don’t close for any number of reasons, your deposit could be gone in a flash. So it is VERY important to treat this as one of the most aspects of your home purchase if you will be requiring a loan to close.
Make sure you find a lender with a great reputation.
Get referrals from people you trust and don’t necessarily leave it up to chance by only selecting the lowest rate you can find online. Many times, those low rates are designed simply as a marketing tool to get the phone to ring.
How to find a lender:
- Shop your own bank or credit union
- Get referrals from trusted sources - verify on Yelp
- Your realtor
Bankers vs. brokers
It is VERY important to select a mortgage banker when seeking out a lender. A mortgage banker is a lender that lends out their own money. If they tell you that you are approved, and they are the ones funding the loan, the loan usually gets done.
Mortgage brokers are simply brokers that take your application and compare your criteria with a mortgage bankers guidelines to determine if you qualify. They are a middle man that connects you with a bank that will give you the money, so they have less control over the process and if they make a mistake, you may be left without a loan.
Conforming vs. Non Conforming
You may hear these terms when shopping for a loan. Any loan that is for $417,000 or less and meets standard underwriting criteria set by Fannie Mae and Freddie Mac is a conforming loan.
Any loan with a large loan balance (Jumbo loan) or that does not conform to the standard guidelines is non-conforming. Non-Conforming loans generally cost more, have a higher interest rate and can require a larger down payment.
Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac are the two largest owners of loans in the country and they are currently owned and controlled by the US government. Over 90% of all loans are sold to Fannie Mae and Freddie Mac.
If you get a loan with Wells Fargo, there is a good chance that once the loan is funded, Wells Fargo will sell the loan to Fannie Mae or Freddie Mac.
Pre-approval VS. Pre-qualification
A preapproval is when all of your details have been considered by an underwriter at the bank and it has been determined that you will be approved for the loan. A prequalification is when the broker or loan officer has seen some of your information and believes that you would be approved if an underwriter had looked at it.
If you are dealing with a reputable company and skilled loan officer, a prequalification is a good indication that you will be able to get a loan, however, it is not nearly as good as a preapproval.
All lenders require homeowners insurance, but your lender may require mortgage insurance or flood insurance. Flood insurance can be costly, so ask your agent whether the properties you are looking at are in a flood zone.
Mortgage insurance usually is required if you have a down payment that is less than 20% of the purchase price.
Time is of the Essence!
Once you get your offer accepted, you usually have 17 days to get the loan completely approved. During this contingency time period, you can cancel the purchase contract if it is determined that you do not qualify for a loan.
It is VERY important to start your relationship as early in the process as you can – even before putting an offer on any properties. Once you open escrow and the seller has accepted your offer, it is imperative that you respond to inquiries from your lender as soon as possible.
Once your loan contingency time period has concluded, the seller will ask you to remove your contingency, which puts your deposit at risk, or they may cancel the contract and you will lose the house.
We have several very efficient and experienced mortgage bankers we have worked with in the past and would be happy to give you some referrals.