You Should Meet with a Mortgage Lender Now — Even If You’re Not Ready to Buy a House
Financing is easily one of the most confusing — and intimidating — parts of buying a house. But the reality is, without a mortgage to help make the purchase, most people just can’t afford to buy a home.
That’s why experts recommend setting up a meeting or a phone call with a lender as soon as possible, once you’ve decided you’d like to buy a house sometime in the future.
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You might be wondering: What if you’re not quite ready to buy just yet, or you haven’t saved up as much of a down payment as you’d like? Even if you aren’t prepared to sign on the dotted line tomorrow, talking to a lender can still be incredibly valuable for several reasons.
You’ll Learn About Various Types of Loans
Although you can read about mortgages online until you’re blue in the face, there’s no substitute for talking to the experts who deal with these loans day in and day out. Even if you’re many months or years away from actually buying a place, talking to a lender can help you become more fluent in the jargon-y language of mortgages and, possibly, even start thinking about which type of loan is best for your situation. A lender can also open your eyes to home-buying assistance programs you may be eligible for, such as those for first-time buyers.
“There is no downfall to knowledge,” says Pennsylvania real estate broker Kristina ODonnell. “The more you know, the more prepared you will be.
As you start your research, remember to talk to multiple lenders, not only to get a feel for how you like working with them and the type of mortgages they offer, but also to get a good deal, says real estate broker Adjina Dekidjiev.
“You can shop around at different lenders to get the best rate,” she says.
You’ll Start Your Home Search with Realistic Expectations
You might think you have a pretty good idea of your budget for a house, but until you talk to a lender — and, better yet, get pre-approved for a loan — you’re really just guessing. With a little legwork on your part, a lender can help you zero in on exactly how much house you can afford, based on current interest rates, your expected down-payment amount, and other factors.
“Most people make incorrect assumptions about what they may or may not qualify for,” says Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage. “In some cases, people qualify for quite a bit more than they were expecting, or we are able to guide them toward lower down-payment or interest-only options to increase their spending power. By speaking with someone early on, you can have a realistic expectation of what you will qualify for so you don’t end up spinning your wheels over a property that won’t work.”
Starting your home search armed with this knowledge is invaluable. It’s also good protection against being disappointed — you won’t get your heart set on a property, then only later realize that it’s way out of your price range, for example. And it can help you avoid wasting precious time looking at houses that just aren’t within your realm of possibility.
“While some home buyers find the perfect home before they get qualified, I have found this can lead to frustration,” says Nicole Rueth, a lender with Movement Mortgage.
You Can Improve Your Finances
Meeting with a lender early means that if some part of your financial picture is less than perfect for buying a house — your credit score, for instance — you can get a head-start on making improvements. And even if you already have great finances, a lender may be able to share tips on making them even greater, thus getting you a better interest rate and saving you money over the long run.
“As a lender, I look at credit, income, debts, and assets,” says Rueth. “Each of these buckets can be improved in order to qualify for more home or lock in a lower interest rate, so a little pre-work can go a long way.”
For some buyers, one to three months may be enough time to get their ducks in a row, says Rueth. But others may need one to two years — or even longer — especially if they need to repair their credit or save up a bigger down payment. As such, the earlier, the better, says Rueth.
Worse still, if you wait until the last minute to go over your finances with a lender, you might be in for a nasty surprise.
“Recently, we have been finding a number of errors on people’s credit reports,” says Alvarez. “While these can be corrected, it takes time to run through the credit bureaus and, if you are at the point where you have an accepted offer or contract, time is not your friend. Rates and loan programs can be significantly better with higher credit scores, so this can have a very real impact on the mortgage you are able to obtain.”
You Could Miss Out on the House You Want
Right now, there are very few homes on the market. Even though interest rates are high, this means that competition is steep. If you don’t have financing lined up in advance, you could lose out on a house you really want, just because some other buyer was more on top of things, says New York City real estate broker Becki Danchik.
“Preparation is everything, especially in a fast-moving market and for a property that is in high demand,” she says.