1. Trust your loan officer!
Lifetime Mortgage Strategy. Finding a lender who can assist you with your purchase should be an easy task. Finding a lender you TRUST is much more difficult. Mortgages are complicated and there are many strategies/options that you can leverage to place you into the correct loan. You will likely have more than one mortgage in your lifetime. You will likely have a variety of situations/conditions in which applying for a loan. Developing a lifetime relationship with your loan officer you trust will help you develop long-term strategies for such an important asset!
2. Competing with Cash Offers
If your loan is fully approved (see Tip 4) when making the offer, you can make a "cash-like" offer and remove the financing contingency with the offer. The financing contingency is the main difference between cash vs. financed offer. Remove that from consideration and you are on-par with a cash offer.
What is critical is that you need a lender who can back you and fully approve a loan prior to the offer! At Home Point Financial, we have a pre-approval system designed exactly for this purpose. We will approve you ahead of time to give you a competitive advantage in you home purchasing process.
3. Start Early
Start early with the financing process to know where you stand. Because a purchase has a Close of Escrow date (COE), there is a timeline that needs to be followed. The new mandated mortgage TRID guidelines place timeline constraints that slow the process down at certain stages. There are mandated "waiting periods" where disclosures are required to be acknowledged. Starting early allows you to work thru the "waiting periods" and alleviate timeline issues.
4. Pre-Qual vs Pre-Approval
The terminology around qualifying for a purchase loan can vary greatly. Know what you have and what you are trying to achieve with the "pre" application process.
A pre-qualification is the easiest and lightest review of your financial situation. The high level metrics of credit, income and assets are reviewed to ensure you meet the minimum requirements for a loan.
A pre-approval is more rigorous review of all of your credit, income and assets. An underwriter will often have many follow up questions (i.e. "conditions") that will be needed to fully approve a loan. Many times in a purchase transaction, these follow-up conditions are where the transaction goes sideways. "What do you mean I cannot use my Self-Employment for income?!"
A full-approval is met when an underwriter has reviewed your documentation AND you have satisfactorily supplied the follow-up underwriting conditions. When you hit this stage of the loan process, you are generally free to "release loan contingency" in your purchase contract because conditions of the loan have been met. If this step is completed BEFORE you are shopping for a loan, you are now competing with cash offers.
5. No new Credit
Do not attempt to obtain new credit (credit cards, car loans, etc...) while you are in the financing process. One of the key qualifying metrics of a loan is your debt-to-income ratio. For most loans, there is a maximum ratio (percentage) that you will be allowed to have as total debt. If you borrow more during the loan process, you will be limiting your ability to qualify for the mortgage.
6. Know the process
Purchasing a home is an intense process. Add a loan to that and it can be overwhelming! Knowing the application process and timeline can significantly reduce the stress and anxiety of a transaction! Early conversations with your lender about what to expect and when to expect it is an important element to a on-time closing.