Talking to a mortgage lender is a crucial step to take before you open houses or find a real agent.
This will help you understand the loans available to you and make you more appealing to real estate agents and sellers.
There are five reasons to talk with a mortgage lender before starting the house-hunting process.
1. It sets realistic expectations
Nothing is worse than finding the perfect home and then realizing it’s out of your reach financially. You can only get zero-percent down loans if you are eligible for a Department of Veterans Affairs loan or Department of Agriculture loan. Putting less down could significantly increase your borrowing costs.
Also, getting an online quote doesn’t mean you are preapproved. Both sellers and real estate agents will be able to see what your budget is by receiving a preapproval letter.
2. Shopping around is possible
Preapproved for a loan does not mean that you must stay with the lender. It’s possible to continue applying for loans from other lenders. However, you should make sure that your offers are received on the same day as your preapproved loan. Mortgage rates change daily.
Keep your credit score strong by doing all your loan shopping within a short time frame. Your credit score is usually affected by every company that pulls your credit report, such as a lender. However, if you apply to multiple lenders in a matter of weeks, then all inquiries will be counted as one inquiry.
3. It helps sellers see it.
You’re serious if you bring in a preapproved loan offer to any potential seller or real estate agent. In competitive real estate markets, you want to be easy-to-reach and straightforward. A seller will trust you are not “just looking”.
4. You will finish the paperwork sooner
To complete your loan, you will need to have a lot of documentation. This includes tax returns, W-2s from past two years, pay slips for the last thirty days, and bank statements. It will be easier to collect documents earlier, which will make it easier for you to close your loan.
5. It lets you know how much you will pay for closing
The first check you write will be for more than your down payment. The lender will provide you with an estimate of the origination, title, and appraisal fees after you have applied for a mortgage. Although the seller may pay a portion of closing costs, you might still have to pay 3% to 6 percent of the loan amount.