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Saturday, 20 July 2019
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This Old House - Do-it-Yourself

Don’t Do This on Your Own

Written by Posted On Wednesday, 06 February 2019 05:00

There are plenty of moving parts that get activated the moment you and the sellers agree to a price and both of you sign the sales contract. That’s when the wheels really begin to turn. By keeping in close contact with your loan officer during your home search you can make sure once your offer is accepted the approval process will be a smooth one.

All of those moving parts are beyond your mortgage lender including your real estate agent, an appraiser and other third parties you’ll never meet. They’re all needed to make sure the loan file is up to standards and meeting all lending guidelines.

Yet before all of this takes place the buyers speak with a lender, get preapproved and have an idea what they can qualify for. But a big mistake comes into play when consumers “prequalify” themselves without the assistance of a loan officer. And that’s where things can get a bit unwound.

So much so that the buyers decide not to buy because they visited a website somewhere, ran some numbers and found out they couldn’t qualify for the amount they needed to buy where they wanted to live. Don’t be those people.

Here’s a scenario for you. A couple does more than their fair share of research about the neighborhood they want to buy in, the different types of loan options and the advantages of one over the other and more. They’ve spent quite a bit of time gearing up to go shopping for their first home.

One of the things they kept reading about was ways to save on mortgage interest. Because of this information they decided on a 15 year fixed rate loan. Then entered all their general information on a prequalification site, selected a 15 year loan but it showed the debt ratios were too high for an approval based upon the information submitted. Dejected, they gave up, resigned to being renters for a little longer.

But what a loan officer would have told them is there are other, longer loan terms with lower monthly payments that could qualify them for the home they really wanted. As a plus, the 30 year mortgage didn’t have any prepayment penalties, those are rare today anyway, so they could pay extra on the mortgage each month, just as if they had a 15 year term.

Another scenario can occur when someone gets a copy of their free credit score and see that it’s closer to 590 instead of 680 or 700. In this instance, that person again sat on the sidelines not knowing they could qualify for an FHA loan which would not only get them in the home but also help reestablish credit through timely mortgage payments. There’s no reason to try and fly solo when shopping for a home. Take advantage of the experience that’s out there.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending.

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country.

Reed was the former Technology Chair for the Texas Mortgage Bankers Association, Board Member and President of the Austin Mortgage Bankers Association. He is married and a father of three in Austin.

www.cdreed.com
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