Getting a Home Loan Can Be A Complicated Process. Buyers feel they know it all… when it comes to lending, appraisals, guidelines- thanks to Google search !! The reality of the matter is that they do not know it all. The debacle of the financial industry we just went through has brought so many changes to compliance, guidelines, ratios that as a Realtor its hard for me to keep up, let alone a consumer who relies on garbage and bogus advice found on the internet.
Here are few items to note for consumers who are out looking for a home and a loan:
- You need to pre approved by a lender, not pre qualified. There is a difference. pre qualification is just based on your numbers run into an excel sheet stating how much you can afford. The pre approval process is a more intricate one where borrowers have to submit their financials to the lender, their credit is run, the debt to income ratios are checked and based on all of the details the file is either underwritten by the loan officer( if you are working with a good one) or run through an underwriter to give the borrower a loan commitment.
- Each and every large deposit into your accounts or out of your accounts have to be accountable and traceable. If you got money from overseas, there has to be a paper trail. This is monitored by the Patriot Act and is implemented to avoid money laundering.
- Buyer is in contract and decides to change their job- your process of getting a loan may get delayed or even jeopardized. You cannot switch jobs in the middle of a transaction and hope for the loan officer or Realtor to save your case. You may have just hacked yourself
- Buyer decides to buy themselves a luxury car while the loan is being underwritten. For every $500 additional monthly debt equates to $100,000 in loan debt. Your ratios could be cutting very close already and you may just blow up your loan.
- You signed your loan docs and are excited that you will fund and close the next day. To celebrate you go buy yourself a car the same day. Guess what? The lender may pull your credit at the last minute and decide you don’t qualify for the loan anymore. True case, it has happened !! or you sign your loan docs and go quit your job because now everything is done. Lender may do another verification of employment !!!
- Your credits towards closing costs cannot exceed what is on the final HUD. The lender will not allow you to take money from the closing table. You have extra credits and if they cannot be utilized, they go away- that money does not belong to the borrower.
- Credits cannot be applied towards buyer’s down payment.
- Buyer cannot make up stories about income. Whether you are a W 2 employee or self employed, the lender will pull your 4506T from the IRS to verify your income. A simple mistake like putting the wrong address on the authorization form can throw your file for a loop.
This is only a sample of what to do or not to do when you are in the process of buying a home and getting a loan. Working with a loan officer who is experienced, can anticipate conditions coming back from the underwriter, can get exceptions done is extremely important. the mortgage industry, just like the real estate industry is inundated with inferior quality professionals who lure consumers with rates. Rates do no good to a borrower if the loan cannot fund and the borrower gets into a risky position to lose their earnest money deposit !!
The same goes for working with a knowledgeable Realtor. With so many untrained, inexperienced real estate agents on the ground it is very easy for a consumer to get coerced into working with them due to the incentives these people offer. Its all great at the front end, but when it comes to managing a file with dexterity, understanding the nuances of the lending industry, to anticipate problems in a file along side the lender and finding solutions, to adhere to timelines and make sure the borrowers deposits are safe- it takes a LOT of work with your Realtor and Lender working in sync. I have seen in many hundreds of cases where the borrowers are at the mercy of inexperienced and untrained professionals and land up having a terrible experience buying a home. Don’t trust every word google tells you with inaccurate information being thrown out at you. Understand the process, remember its complicated and you need someone who can hold your hand and guide you through the whole process.
For further questions you can contact Rama Mehra at 925-415-0835.