For most buyers, financing the purchase of their home is a must. For first-time buyers, this can seem like an insurmountable obstacle to getting the home they want. Even when the process of financing becomes clearer, there is still a feeling of being unnecessarily scrutinized. Many feel it is way too intrusive. So let’s pause a minute and look at it from the lender’s point of view.
Lenders making a mortgage loan are being asked to commit money for the next 30 years. Today’s interest rate will likely look far too low in 5 years’ time. Even if interest rates remain where they are today, the lender is tying up money for 30 years! That is a very long time. So lenders want to know that they are lending this huge amount of money to someone who will pay them back as agreed.
Paperwork will vary depending on the borrower(s). At a minimum, you can expect to be asked for your tax returns, W-2s, pay-stubs and a credit report. Eventually, they will ask you to sign a form allowing them to verify your employment. If you are self-employed, the scrutiny will go deeper as the concern is your track-record as a business owner. Will your business thrive in the years to come? It is in the collection and review of these records that people feel the lender is being too intrusive. When you consider that, once committed, they can not get their money back for 30 years, you can start to see why they want to be so careful.
The seller will typically want to be assured that you can get your financing before they take the home off the market. This is normal as once they are committed to selling you the home, they can not entertain other offers. To give up this right to find other buyers, they need to know you are their ideal buyer. Who is their ideal buyer? One that has the money to complete the purchase. This explains why so many investors who offer cash will win the bidding for a home. However, buyers using financing can prevail by showing they have already talked to a lender and perhaps even have underwriting approval on a To Be Determined basis. To the seller, this means all you have to do is tell the lender the address of the home in question and in 3 weeks the home is yours (and they get their cash).
These are some of the issues that come up when financing the purchase. It can seem too intrusive and time consuming. However, consider that it enables you to get a home now rather than wait 30 or more years to save the money needed.
If you need help with finding your path to a home and financing the purchase it, get in touch at 760 622 5087 and I will get you started today.