The time has finally come – You’re ready to shop for a new home! Whether you’re a first-time buyer or a seasoned real estate professional, there is a crucial step in the home buying process that must always be approached with careful consideration: Financing. We understand that the pre-approval and financing portions of the home buying process can be daunting. What should you do to help your approval odds? And what shouldn’t you do? Will that celebratory shopping spree after applying for a loan really be the reason you miss out on your dream home? We know you’ve got questions, and we’re here to help. Check out our tips and tricks below (given to us by our very own in-house mortgage brokers at 5th Street Financial and new homes sales agents at W Marketing New Homes!) and walk into the pre-approval and home buying process with more confidence than ever.
Step One: Set Yourself Up For Success
Believe it or not, a lot of your success in financing your home actually starts BEFORE you even begin to shop around. We spoke with LuAnn Scally, Sales Manager and Senior Loan Officer at 5th Street Financial, about steps you can take before even meeting with a loan officer to help you put your best foot forward. “Check on your credit and do any “clean up” that needs to be done before applying for a loan. Paying down credit card balances so they are under 50% of the total balance helps increase credit scores. Additionally, talk to family members who could potentially either gift you the funds or be non-occupying co-borrowers if needed. Buyers can also check with their employer to see if a potential pay increase is possible in the near future to help boost their qualifying income.”
Step Two: Don’t Put The Cart Before The Horse
Once your credit is cleaned up, it’s (almost) time to shop! Your last stop will be to meet with your lender and see what you are pre-approved for. This is a vital step, as it will provide you with a price range that you can work within. Tim DeBellis, REALTOR®, says “The best thing you can do is work with a lender well in advance of starting the home search process and to be fully transparent about your financial situation. This helps a lender to establish a complete picture of one’s current financial situation and what will be needed to secure a loan, before starting to search for a home.” Securing financing is all about securing your expectations as well. “Working with a lender in advance helps to determine the price range with which you can qualify, making the home search process much more efficient,” says DeBellis.
Step Three: Stay The Course
Once you have found your perfect home and your loan application is in, the best thing to do is, simply, not much. That is, don’t do anything that involves actions that could raise your credit usage and lower your score, or cause you to spend large sums of money. It sounds simple, but making these mistakes is a lot easier and much more common than one may think. “Some common mistakes I see buyers make after applying for a loan are, for example, buyers will go out and purchase new appliances on credit after they go into contract thinking that once they are pre-approved, they won’t have their credit checked again. Lenders run credit right before escrow closes and any new purchases will affect their current qualifying debt-to-income ratios. Same with purchasing new vehicles during the process of a loan. A car payment can adversely affect their loan approval. Buyers should not allow their credit to be run by anyone else during the process,” says Scally. “Every time credit is run, their credit score is affected and if the score drops, this could affect their interest rate and their loan pre-approval.” So the main takeaway? When in doubt, wait it out. That new car or washer and dryer set won’t look nearly as good if it’s the thing that costs you your approval.
We know this whole process can feel a lot like walking a tightrope. But the key things to remember are, strategize your credit and finances, and work closely with your lender and agent. This team is here to HELP you. “Pre-planning and preparation are two of the most important factors to better position buyers for success in a competitive market. The most successful buyers are those that have worked with their team of real estate professionals, including their agent and lender, to establish their qualifications and to develop a solid strategy in advance of starting the home search process,” says DeBellis. We won’t lie – The home buying process is a delicate one. But having the right team on your side and getting all your finance details squared away will be the golden ticket into your new home.
Interested in taking a look at your finances and getting pre-approved? Contact our in-house mortgage broker 5th Street Financial to get started! And don’t forget to check out all of our available new homes communities on our website! Tim and his incredible colleagues are ready to help you get home.
