1. Interview Loan Consultants
A loan consultant can make or break your home buying experience. Interview 2 or 3 consultants making sure to ask about the products they have to offer, interest rates, and make sure you have a good rapport with the consultant. Some questions to ask:
- How long are your turnaround times on preapproval, appraisal and closing?
- What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)
- What are the down payment requirements?
- How will you keep me up to date on the progress of my loan (some lenders have automated processes to notify you when milestones have been achieved)
When I work with first time home buyers, I work closely with their loan consultant to make sure that they understand the process and their options.
Here are three loan consultants that I recommend interviewing:
2. Know Your Credit Score
This topic can sometimes be scary for first-time homebuyers because they don’t know what to expect. One of the key factors in determining whether or not you will get approved for a loan and what rate you will pay is your credit score. Once you have your credit report review it to make sure it is accurate. Check your report for mistakes and dispute anything that isn’t accurate. Also, consider paying off any debt that could raise your score. Avoid any large purchases or anything that requires a credit check. Credit scores have become a complex algorithm – choose a loan consultant that can help you interpret your score and advise you on ways to improve your score.
3. Get Preapproved
Being preapproved with a lender will give you an advantage when looking for a home. You will have a clear idea of how much you can spend on a house and how much money you will need for a down payment and closing costs. Typically lenders use the 28/36 rule. Your mortgage payment cannot be more than 28% of your gross income and your overall debt including your mortgage can’t be more than 36% of your gross income. After you reviewed lenders and chosen someone you are comfortable working with there are several things you will need to have together for the preapproval process.
- Social Security numbers for yourself and any co-borrowers
- Bank, savings, checking, investment account information (2-3 months of bank statements)
- Outstanding debt obligations, including credit card, car loan, student loan and other balances
- Two years of tax returns, W-2s and 1099s as well as recent pay stubs
- The source of your down payment (savings, gift etc.) and how much it will be.