If you are thinking of buying, one of the most important steps is choosing the right lender. In today’s market, being able to present a confident offer must include a letter of prequalification or preapproval from a reputable lender. Many times, sellers are willing to sell their home for a little less to work with a lender they know will be able to close. Following are 3 Dangers of choosing the wrong lender.
1) Payment and closing costs change- When you first apply for a loan, lenders are required to give you an estimate of what your closing costs and payments will be based on the price that you qualify for. Unfortunately, some lenders will use a classic “bait and switch”. They will present you with one payment and closing costs scenario, only to change it once you are under contract and ready to close. At that point, you have put down earnest money and paid for inspections and appraisals, and possibly more!! You are now stuck paying more or you lose you dream home. DON’T let this happen to you! Choose a lender that has a track record of keeping their closing costs and payment the same from initial disclosure.
2) Inability to meet deadlines- Real estate is a time sensitive business. There are deadlines for disclosures, inspections, appraisals, and settlement. The Real Estate Purchase Contract says that ‘Time is of the essence’. That means things have to happen or you lose out on your earnest money and possibly your dream home. Make sure your lender understands the importance of meeting deadlines and has a proven track record of keeping those dates.
3) Preapproval falls through- Imagine going through the process of searching for your dream home, putting earnest money down, conducting inspections and appraisals only to have your lender tell you a few days before closing that you aren’t qualified and you won’t be able to buy the house. That seems absurd, doesn’t it? It happens, all too frequently! This is what we call the ‘dream killer’. It’s one of the worst things that can happen. You lose not only your earnest money and home, but the dream of home ownership is snuffed out. Many people take this so hard they put off buying for 2, 5 or even 10 years. It’s easy to avoid! Work with a lender that can prove they have track record of closing their preapprovals. Make sure they are telling you what you need to hear, not what you want. If they aren’t getting important documentation from you prior to writing a preapproval, something is wrong. Make sure you turn over income documentation, including tax returns. You should also confirm that your credit is good enough to qualify for the loan you desire. In most cases, your lender should be able to provide you with an underwritten approval that will only require you find a home. You should be wary of any lender that will send you out looking for a home and putting earnest money at risk without some thorough work beforehand.
Buying a home is a wonderful time. Make sure you guarantee yourself a smooth experience by choosing the right lender. Your real estate agent should have a preferred lender that they can refer to you.
Click the link below for a quote from my preferred lender, Tom Speirs from Citywide Home Loans!
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