It’s March. Home-buying season is about to get underway. Prospective Sellers are in the process of renovating their homes in preparation of putting them on the market. You have decided on the real estate broker/brokerage you would like to work with throughout your purchase… (hopefully, that’s me!)
Before starting to look at houses, I urge you to get a pre-qualification from a reputable lender! Most loan originators can provide you with a pre-qualification within 24 – 48 hours. Many can do it the same day, depending on how busy they are on any given day.
In my opinion, this is the best piece of advice a broker can give to his Buyer-client.
For the sake of argument: let’s say you are looking for a house with a value of $250,000. You find a house you love, and want to put in an offer…but you don’t have a pre-approval letter. Someone else puts in the exact same offer, but they’ve gone through the initial pre-qualification process and have a lender’s letter to attach to their offer. Question: who do you think the Seller is going to choose?
For the sake of argument, Part 2: let’s say you are looking for that same house with a value of $250,000. During your search you see the “house of your dreams”, but it is listed at $275,000. You decide not to look at it because it is out of your price range…
But is it?
This precise scenario happened with one of my clients last year – before they signed with me. They had spoken with their local bank and the loan originator gave them a budget. Their budget was $25K under the list price of a house they loved. They never called the listing broker.
During their search, we were introduced through a Zillow inquiry… and during our initial meeting I learned they had obtained their pre-approval letter three weeks earlier.
I encouraged them to get a second review…
As you may or may not know, your credit score is reduced by a few points any time your credit report is requested…unless it is being pulled during the same home purchase. In those instances, your score is only reduced by those same 3 or 4 or 5 points no matter how many inquiries are made… as long as the inquiries are initiated within 30 days of the initial request. So, whether there are one or ten inquiries, your credit score is still only reduced by that initial amount.
So, my clients made an inquiry through my preferred loan originator. Her company works with a myriad of lenders, who have portfolios with differing tolerances for exposure, and who offer a variety of different programs. My new clients were offered a loan maximum that was $35K more than the local bank was able to offer.
Then we negotiated a sale price that was $11,000 less than the list price.
And then my clients closed and moved into their new home.
This is just one real-life example of how “shopping” can benefit Buyers. Beyond this type of scenario, there are other ways that consumers can benefit from shopping around… as lenders have varying interest rates, points, costs, etc, associated with their loan products.
The oft-maligned Consumer Financial Protection Bureau has been a boon for home buyers. The CFPB was created in 2010 (as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act). By 2012, the CFPB had taken steps to simplify mortgage disclosure forms and make it easier for consumers to compare loan products. The Bureau cut the number of disclosure documents to two: a Loan Estimate form and a Closing Disclosure form. (Click on these links to view the CFPB’s explanation for each form)
The resulting “Know Before You Owe” mortgage disclosure rule went into effect at the end of 2015. It enables Buyers to take the same simplified forms from multiple lenders, lay them side-by-side on their table, and compare the cost of the loan from various lenders.
One form. One layout. Multiple lenders.
One decision. Apples-to-apples.
(So as not to confuse anyone, I mentioned there are two forms, and then I just said, “One form”. There is now only ONE loan estimate form that all lenders use and ONE closing disclosure form that all lenders use…whereas, each lender used to have their own forms with varying language and terms, so borrowers had a hard time comparing them. Now forms have been standardized… so consumers can easily compare that same “one” loan estimate form from five lenders. Ditto, for the closing disclosure form.)
Now you, as the Buyer, are able to make direct comparisons…and choose the loan product that is right for you.
And now you can make that offer on the “house of your dreams”. Give me a call (603-856-3063)… let’s get started!