Mortgage professionals have a tough job with first time home buyers. Clients come to them with the highest of hopes that they can get a mortgage to purchase their first home. Often, the mortgage professional is faced with educating them at the same time as they are working with other clients, finding new clients and attempting to get it all done for everyone. Most mortgage professionals will do an adequate job with first time home buyers, but there are always a few things that fall through the cracks. Here are three of the more common surprises I hear from first home buyers about the mortgage process.
Your first step is not your last step – I have been told by many people buying their first home they are surprised to find out that the initial review of their credit and employment is not the final step in the process. Many people do not realize that they are only prequalified for a loan versus being getting the final approval on it. First time home buyers need to realize that mortgage companies will be very intrusive into their lives, asking for things that might feel very private. It is a necessary evil of the process. If you want to get a mortgage today, you should expect to be an open book for the mortgage professional as they will ask about employment history, where you have lived, about charges on your credit card statements, deposits made to your checking accounts, etc. Some will even ask you to write letter explaining why you are purchasing the home. It can be very overwhelming and stressful. Be patient with the process and it will be over before you know it.
If you home doesn’t appraise at the sales price…. First of all, some first time home buyers don’t even realize that an appraisal is required by the lender. The lender will require it to be assured that the loan they are giving matches, or is less, than the property value. They do this to ensure that if things ever get dicey for the first time home buyers and they have to foreclose on the home, that they can regain the loan amount when selling it. It can be a hit and miss on whether the appraisal will come back at the contract sales price of the home. If the market prices are accelerating at a fast pace, sometimes appraisals will be lower than the agreed upon sales price. When this happens, the seller will have to lower the price. If they seller does not want to do this, the buyer will have to come up with the difference between the sales price and appraised value. A third option is that you find a middle ground where the seller lowers the sales price somewhat and the buyer puts more of a down payment. As with everything else in real estate, it is a negotiation that your agent will assist you with.
We recheck everything the last week before you close – You have gotten through the constant questions, the appraisal came through, you have a time and date to close on your first home. You are a week away from getting the keys. Boom! The mortgage company asks for more information. They check your employment and credit one more time. There are more questions to answer. I have found the last week before closing on a home as the most stressful period faced with buying your first home. Because they do check things up to the day of closing on your house, here are some things to consider during the mortgage process.
Don’t get any more credit cards. Don’t even apply for them.
Do keep all credit cards active.
Don’t get crazy with purchases and max out your credit cards.
Do keep your same employer
Don’t try to consolidate your debt.
Do take care of any collections, judgments and/or tax liens
Do pay all your bills on time.
Don’t make any large deposits into your accounts!