I have Financing Options?!

5 Steps to Seeking out and Securing the Best Lender for your Real-estate Transaction

Gone are the days when it takes an 800 credit score and $50,000 in the bank to get pre-qualified and financed for a loan. Lending has become more complicated and creative so that any responsible person over the age of 18 can purchase a home on their own! This is great news for the economy and for those ready to take on the responsibility of owning a home or investment property. Whether you're a first time home buyer or a seasoned and savvy investor, there are always advantages to keeping your options open at the beginning of each new real estate transaction, particularly with lenders.

1. Lenders Terms

While researching financing options, you may hear that there is only one term you need to worry about....the rate. But what if the rate is locked in for the life of the loan, but you can't refinance or pay the loan off early for the first 5 years? What if you only plan to keep the property for 3 years? Take your time, don't let lenders pressure you into "locking in the rate". Be just as confident in your terms for the loan as you will be when you find the right property to purchase.

2. Budget for your new house or investment property

Your budget is not based on the amount of approved financing. Your budget should be based on the purpose of the property. Is this a first home and do you plan to upgrade in the next 5 years? Then you will need to budget to save for the next property, right? Is this an income or investment property and will you need to budget for repairs and upkeep based on rental usage? Do you want to actually make a net income on this property? Ask yourself, how will this property be used and what do you want to do with it in 5 years? That is how you budget and prepare. Side note: Full disclosure, most sellers plan to sell their house without spending a lot of money on big ticket items like roofs, water heaters, and other utilities. Be prepared to spend money on at least 1 big ticket item in the first 1-3 years of ownership unless the house is less then 10 years old.

3. Educate Yourself

Ask the right questions of your potential lender. Questions like: "will you go over the Settlement Statement with me line by line?", "...what does this mean?", "If this changes, how will this affect this?" Be curious and make it a learning experience. If your lender isn't willing to spend time with you, you will potentially miss important information that may cost you thousands of dollars. Understanding the lending process is half the battle!

4. Your Confidence is Key

I know it's so rude to shop lenders and they will make you feel that way if you let them know your shopping. But honestly, take your time and make sure you find someone who is being honest with you and isn't just a fast talker. Real estate transactions aren't to be taken lightly, you and your lender should be partners and you should never feel like you're at opposition with them. If they don't answer simple questions at the beginning, drop them and move on. If they seem uneducated or unwilling to get the answers, drop them and move on. On the flip side of the coin, a lot of professionals who are good at what they do are a little cocky sometimes. Don't be afraid of a confident lender, just verify they've been in the industry long enough to be so confident.

5. Timing & Trust

Make the final decision and make it quickly. Don't drag it out because you want your lender to trust you too! It's a two way street. You want a lender to go to bat for you if the going gets tough. You don't build trust by pinning people against each other or treating them like you'll be doing them a favor if you choose their services. Take about a week or two to compare between 5-10 lenders. Once you are confident with the lender, let them know that you've made the choice and are ready to commit to getting them everything they ask for in a timely and organized manner. This can be the beginning of a beautiful professional relationship.