Real Estate Matters
By Elisa Jo Eagan
While real estate agents have a great deal of practical experience to offer in the finance realm, they are not mortgage lenders. That means that they are not able to give you specific advice about which mortgage to choose or how you should finance your home purchase.
However, real estate agents are great connectors and they can put you in touch with a number of professionals who can help you through the process. In the meantime, they can help you to better understand and evaluate your options and come up with decisions along the way that work for you and your family.
Since the financing of a home purchase is generally the most complex element of the transaction, it is important that you discuss your finances and financial needs with your real estate agent upfront. What follows are a few questions you might ask your real estate professional along with some insight into their possible answers.
Do You Have Any Lender Referrals for Me?
Your real estate agent or broker probably knows practically everybody in your market, including a variety of excellent lenders and mortgage brokers. He or she will be able to refer you to several. You will probably want to compare a few different lenders in order to get a sense of what your options are and what products that they offer.
How Should I Choose the Right Lender?
Your personal financial situation will go a long way in determining which lender is right for you. There are lenders who specialize in working with first-time home buyers, buyers with poor credit, self-employed buyers, and more. Talk with your agent about your specific needs, and find out which lender is best able to help you.
How Early Should I Start Preparing for the Mortgage Process?
The answer will probably be “yesterday” since it is never too early to start thinking ahead your mortgage application and approval process. You will almost certainly want to check your credit reports, pay down debt, and improve your credit score as needed. However, you will not want to actually apply months ahead of time since rates will change and different options will become available.
House I Can Afford?
At this point, you will probably want to choose a lender and undergo a pre-qualification or pre-approval process, depending on how ready you are to begin your home search in earnest. What is the difference?
– Pre-qualification is based on information you provide to the lender and can give you a quick idea of your home search budget.
– Pre-approval is more detailed and involves submitting your application and documentation to your lender in order to begin the underwriting process. This is an important step as you will want to submit your pre-approval letter with your offer on a home.
What Should I Be Careful About During Underwriting?
You will want to make sure that your financial history is as clean as possible, so avoid having insufficient funds in your checking account and do not open new credit accounts. If you are contemplating any major changes to your job or financial picture, talk to your real estate agent first and find out whether they could affect your purchase.
What if I Need to Sell a House Then Buy?
If you don’t have enough for the down payment without the sale, your real estate agent can connect you with a lender who specializes in loans that are designed for exactly this eventuality. Alternatively, he or she may be able to help you navigate a 1031 Tax Exchange or other alternative option. Be sure you talk with your agent about the funds you will require as you price your current home, and what your true bottom line will be.
As you continue through the process you may want to discuss a use and occupancy or other options to help your timelines sync up and smooth the transition between homes. Perhaps both properties will go to closing back to back on the same day.
Can I Get Help With Closing Costs?
If you know that you will need help with closing costs, talk to your real estate agent about how you can structure your offer in order to ask for the seller to help at closing. This will often involve offering a higher sales price to make up some or all of the difference.
What About Down Payment Assistance?
Your real estate agent should have a good understanding of ways to obtain assistance. These may be specific to a particular neighborhood, city, county, or the state or governmental agency. They may also be part of a builder’s offer, or they may be based on your place or type of employment, financial history, income, or other factors.
Can You Explain Contingencies Related to the Finance Process?
When you make an offer on a home, your real estate agent will discuss with you the various contingencies that you can add into the contract of sale agreement with your offer, including a financing contingency and an appraisal contingency. There will be various options available so it is important to ask your agent how these will affect both the strength of your offer getting accepted by the seller, and making sure of your own protection during the process.
Are There Alternatives to a Traditional Mortgage Loan?
If you are looking for an alternative financing option like seller financing, or a 1031 Tax Exchange scenario, be sure to discuss this with your real estate professional early on in the process. This will allow him or her to connect with colleagues and investors in your area to help you find the property that fits your needs and your pocketbook.
Remember, your real estate agent or broker has a fiduciary duty to protect your financial information. Any information that you share about your finances or personal circumstances will be held in strict confidence. Ask your agent about their perspective and insight that they are able to provide to you so you can better understand the process and make more informed decisions.
With hugs love and warm regards,
For real estate information and advice, contact Elisa Jo Eagan, the “Real Estate Godmother,” at 609-703-0432. Learn more at www.therealestategodmother.com.
For More Real Estate Questions, Information and Advice Contact Elisa Jo Eagan “The Real Estate Godmother” (609)703-0432 and Remember…”There’s No Place Like Owning Your Own Home!”
