Monday, October 28, 2013

Talking to a lender

It's been a while since I've posted here.  Since the last post, there has been a shift happening in the real estate market that continues.  With rates being low and prices fairly steady inventory still low (in Springfield anyway), there is an important component that you want to pay attention to when purchasing your home.  That's the lender.  Many don't know that much about real estate and even less about financing so, how do you even start a conversation with a prospective lender? 

First, know there are some real similarities between lenders.  They all quote you terms, rates, etc.  Beyond that, there can be hidden costs associated with closings, processing, office fees.  Servicing is something few think about but can be important.  Just a few things that you'll encounter with a lender so, here's a few questions you might want to ask the next time you are shopping around for a new home loan:

1. After talking rates, terms, points are there any other fees associated with the origination of the loan?  A good lender will be very up front about their fees and give you a breakdown of them before you even take the first step.  It's important to feel comfortable with your lender just like your agent and this is a big part of earning that trust.

2.  Do you service my loan after you've got me as a customer?  While this is not a show stopper it's something you do want to know about.  In some cases, the lender may know who will service and will do a good job handing your loan off to them.  They will be clear at the closing table confirming what you were told up front.  Most will give you the name and address to send payments.  Don't panic if they don't have that information but it's comforting to know right away.  You will be notified of this information shortly after closing.

3.  What financing options do I have that fits my needs?  You will disclose your financial condition to the lender before you settle on the loan.  With that, a good lender will help you save money; sometimes recommend products that will require no money down (yes, they do still exist).  If the lender offers you only a 10% or 20% down loan, keep shopping for a lender.  Unless you have some special circumstances that keep you from qualifying for other loans, you should be qualified for several programs that give you plenty of options.  Here's an example, I'm working with a couple that has some special requirements needing a 4 bedroom house for $80k.  Not unheard of in this market but difficult to find move in ready.  With a phone call from the lender and customer, we were able to have the customer qualified for about $20k more!  How?  A little more down borrowing from their 401k gets this family a move in ready home and opens up many more possibilities for the right home.

4.  As with 3, has your lender worked with your real estate agent?  It's highly important that your agent and lender communicate well throughout the entire transaction.  You, the customer are not the expert, they are.  Their job is to keep you informed and in the loop every step of the way!  Also, your lender should have some experience under their belt processing and closing loans. 

This is obviously, not all the questions you need to ask but it will get you started and give you some information that is important to think about before you become locked in with a lender.  Just don't be afraid to ask questions, look for help from your real estate agent in finding a qualified lender.  Good agents will guide you through this process and be an excellent resource in this step.  Most will send you to lenders they've worked with but don't feel you have to use just them!  Hopefully, this will help make this process as smooth and painless as possible.

Buying a house can be stressful but good agents, and good lender should take away this stress and help you feel confident you've made the right decision on the right house!