Financing your home

If you are thinking of buying a home in the near future, whether you are a first time home buyer or a move up buyer, you will be well served to prepare your financial affairs in advance.

The mortgage loan industry has changed considerably over the last few years. Regulatory agencies have clamped down a lot on the lending industry and guidelines have become a lot tighter for home loans.

One of the very common responses we hear from move up buyers who bought their last home over five years ago, is “why do I need so much paperwork now? Last time it was so much easier!”.

They are right, prior to the housing debacle, if you had even halfway decent credit, many lenders did not even worry about verifying that you had a job. Sounds crazy but that is how it was. In fact, many lenders chose to just increase the rate on the loan by a small amount to forgoHome-Lenders the tedious verification of income and make it easier on the customer to get their loan without “the hassle” of paperwork.

Today, it is a much different environment. The general attitude towards lending is “trust, but ALWAYS verify”. This means paperwork, and more paperwork. It does not matter which lender you go to, they all require generally the same paperwork. The loan sales person may tell you they don’t but by the time the application gets to the person who actually makes the decision; The Underwriter, they have their own opinion on the matter. And they want paperwork. Proof, verification and corroboration.

The best thing to do if you are planning to buy a house soon then, is be prepared. If you line up all your documents in advance, the process will be a lot smoother. Not only that, you will know in advance if you have to make some changes to your finances that take time to reflect where needed. Take for instance, you have a little too much debt on your credit cards, even if you pay them off at the end of the month. Many people do that, they use credit cards because of the “rewards” or “points” or “miles” they get and then pay them off every month. The problem is, the reporting agencies show running balances, and those have to be taken into account on your debt load, even if you pay them off.

The answer to that is pay them off, and not use them for a couple months so they show zero balance at the time the lender runs your credit for the loan. And you can’t do that if you have entered into a contract to buy a house with a 30 day close. This happens all too often and the borrower ends up upset with the lender, the REALTOR, and everyone else.. when in fact, it is not any of their fault.

This is just one example of many areas where an “ounce of prevention can be worth two pounds of cure”. In addition to credit, there are things like seasoning of funds to buy the house. Many times, buyers think they can just show up with the $50,000 grand that granny gave them cash to buy a house and that should be OK. Not so much. The Feds now want to know where every penny that you are using to buy a house is coming from. Every Penny. “Granny gave us the cash” will not satisfy the burden of proof. There are ways to solve that situation, but they require time. 2-3 months at least. And you can’t buy your way out of that, only time can solve the dilemma.

The great news is, interest rates are incredibly low right now, and it looks like they are going to be low for at least the short term ahead. If you have good credit, make a steady income and have a little money saved, you can buy a house and stop renting.

A seasoned professional can guide you through the home lending process and all its hurdles. Getting the right loan from the right lender is a pivotal point in your home buying process. No loan, no house. Make sure you select your lender carefully.

I have had the pleasure of working with a few select lending pros who deliver on their word and have excellent reputation in the industry. I’d be glad to recommend someone who can make your next home buying experience a stress free experience.