5 Reasons to Talk to a Lender First

So you have decided you want to buy a home, whether it be your first or your lake-side retirement home, you have actively decided what you want. It is important before you start looking at homes that you get pre-approved for you mortgage. Sellers see the word pre-approved and get very excited, as do we realtors. Here's why...

Realistic Expectations

What good is finding your dream house, only to realize that it’s just outside your financial reach. Zero-percent down loans are a thing of the past (unless you qualify for a USDA or VA loan) and putting less money down can substantially increase your borrowing costs. Furthermore, getting an online quote is different than being pre-approved: you might find that lenders are harder to pin down than you think.

Shopping Around

Just because you’re pre-approved for a loan doesn’t mean you have to stick with that loan. You can continue to apply for other loans from other lenders – just be sure to collect your offers on the same day, since mortgage rates change every day. For the sake of your credit score, remember to do all of your loan shopping in a two-week period. Typically, your FICO score gets dinged every time someone – like a lender – pulls your report. But when it comes to mortgages and other loans when you’re expected to shop around, you have a “grace period” during which all the inquiries made count as one single inquiry.

Get Their Attention

Coming in with a pre-approved loan offer, whether you’re talking to a realtor or a potential seller, proves that you’re serious. Especially in hot real estate markets, you want to present yourself as hassle / complication-free. You aren’t “just shopping” – a seller can trust that you can actually sign the check.

Know Your Costs

You’ll probably have to pay lender fees (such as application or credit report fees), and may pay points, mortgage insurance, title insurance and more. While the seller often pays at least some of the closing costs, your share might be as high as 3-5% of the home value. Talk to a lender beforehand to get a sense of how much you’ll pay in points, mortgage insurance and loan fees, and verify that you have enough in the bank to cover these in addition to the down payment.

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