Talk to lenders before seeing homes

by Deniece Watkins Smith

As home buyers prepare themselves for the bottom of the real estate market, they are attending open homes consistently. There are many potential buyers who are beginning to look at purchasing their first home in the near future. As a conscientious Realtor, I worry that Buyers are still using a method which presents unnecessary risk to their purchasing process. So how does a buyer minimize risk in today's market? Call some lenders first, yes first, before going to open homes.

Seeing homes first seems very logical. You might say, "Let's go see if we can find a house we like. If we do, maybe we'll make an offer on it." Again, seems logical. If you are a buyer who has thought this, you are part of the ninety percent of buyers who sees homes first, quickly chooses an agent, then makes an offer on a home, then talks to a lender. This is a big trap! Be very careful when doing this.

To explain, the home purchase process has many details, which when overlooked can be risky for Buyers. Buyers think that logic will be the primary tool they'll use to analyze if home purchase is appropriate for them. However, once they find the place they love, emotions take over and they'll do almost anything to live in the home they found was just right.

A smart Buyer must remember that the decision to move effects lifestyle, family, income, investments, stability, they way others see us, our ego, our pride..shall I go on?

So you say, "Hey, I'd like to be prudent in my purchase. What should I do?" The answer: Talk to lenders before seeing homes.

The average consumer hears a lot about interest rates, but doesn't hear about all of the other factors that are involved with a loan. Loan variables can include, but are not limited to: length of the loan; amortization schedule; interest rate; available loan products; income; credit score; pre-payment penalties; reserves; down payment (starting equity); family health situation; how long you plan on living in the home; will it be your primary residence? .
Again, these are only some of the variables to consider when getting your loan.

Lenders frequently change what types of loans they are marketing. This week Bank A may be offering a special on an adjustable rate loan, and Bank B may not even have that product available. Next week Bank A may raise the rates on that product because they are promoting a different product this week that makes more profit for them.

In this volatile lending atmosphere, there is that possibility that Bank A may no longer be around the week after that. So be sure to become familiar with Bank A, Bank B, and Bank C to add certainty to your purchase.

Understanding everything you can about loans should be done before you consider seeing homes. The pressure of working full time, taking care of your family, and finding time to know all you should about your loan is very difficult to do in the time frame allotted in your contract. In Silicon Valley, this time frame (or financing contingency period) is extremely short. Buyers can propose anything in a contract with regard to a financing contingency. However, Sellers feel most confident with Buyers who have already done their homework and won't be using the Sellers' time to do their learning. Having done your lending homework decreases risk to you and makes a Seller more sure of you, which in turn can give you a great advantage on the price you offer, the terms you propose, or even (yes, it's still happening locally) being the winning bid over another Buyer's offer.

Take your time to learn about loans, choose a lender you like, then find your home.

A list of recommended professionals with whom I do business, including reputable lenders, can be found on my website www.dsoldit.com.