Money Talks…Lenders Walk
We have been following our first time home buyers as they dip their toes into the waters of finding a home. Murky waters, indeed, but so far not dangerous. Not so the next step: dealing with the lender.
Then when is the right time to contact them? And how many? You don’t want to have them all run your credit history too many times or it might lower your score (or so you have heard). Your tennis buddy has a friend who can get “a really low rate”. Can he really know that if he does not know your financial health?
No, he can’t.
To really compare lenders’ programs, you need them to give you the same data in the same format as of the same day. Tricky? Yes.
And why do they demand so much personal information? Is it really important that they see your bank account statements for the last 3 years and right up to the minute of closing? Why? Did someone say that if you open a new credit card account the day before closing the lender might pull out of financing your home sale? Could happen.
If you are married, will a lender give you a better rate if the note is signed by the one with the better credit? Is that legal? Can both people own the home? Some lenders dictate that the married person who is not obligated on the loan waive rights of ownership under certain circumstances. What happens if the payments are not made? Can they take the house?
After you give them all of your information, including your pay stubs, your loan balances and your first born child (no wait, that is hyperbole), they issue you a letter that says something like this:
“We, lending institution, agree to loan you X% at a rate of X% IF your home appraises. And by the way, the appraiser may be from the other side of the state and completely unfamiliar with your lovely neighborhood. Then, if we decide to do away with this loan program or if you get laid off or if you have a drop in your credit score, or if you have an unexplained deposit into one of your accounts (like you sold some stock, for example), or if you tell us the truth about what repairs the seller agrees to do after the inspections, we will just refuse to loan you the money.”
Try relying on THAT. And there appears to be NO RECOURSE for buyers subjected to this type of treatment. Why? Because lenders HAVE THE MONEY. And residential commitments are not true commitments like the ones the commercial lenders issue. Those are real contracts with real rights and real teeth.
Then there is the timing. What a nightmare! The sellers want to close in 75 days but the lender will only commit to a rate for 45 days. Or you commit now and lock in but then the rates drop and they tell you it will cost you 1% to float down to the lower rate.
• Perhaps the most important decision a buyer makes in the process is what lender to use
• Buyers should get pre-approved by a good lender that they trust and then SHOP that deal after they have gotten through the inspection process.
• Agents need to be well versed in lender lingo and tactics so they can guide their buyers through the maze of lending practices and avoid the many pitfalls
• An agreement of sale has only a few areas where a buyer can default, but failing to apply for the mortgage that was stated or not providing the mortgage commitment on the designated date are two of them and either one can cause a loss of deposit.
To get the right answers you need to ask the right questions. Visit Choosing a Lender for a comprehensive list of what you need to know about a lender.
To avoid these issues and others when buying a home, use the services of an experienced, trustworthy exclusive buyer’s agent. Sage Realty is one of the ONLY exclusive agencies in the Philadelphia metropolitan area. Even if you are buying in another market, ask us to refer you to the best EBA in that area. If you are a first-time home buyer, your fears will be eliminated. And if you have bought a home before, you will have a completely different experience. Contact Sage today.