The lending process can be daunting. Our current lending climate may be vastly different from the last time you purchased a home. I sat down with Michele Grzelak, Loan Officer for The Heinemann Team at American Security Mortgage Corporation, to get a handle on what consumers need to know about today's lending process.
Lenders are there to guide you step by step as you navigate the actual purchase of your home, but there are a few things you can do before you get started that will help smoothe out the process:
- Check your credit. It's easy to go online to a site like https://www.creditkarma.com to see what is going on with your credit. There may be some small detail such as a lingering old cell phone charge that needs your attention. The little things, that are sometimes a simple fix, can have a big impact on your credit score and ultimately getting approved for your home loan.
- Get pre-approved. There are many reasons to get pre-qualified and pre-approved (see my previous blog: http://rachelonrealestate.postach.io/post/top-4-things-buyers-need-to-know-about-pre-qualifying-for-a-mortgage ), but the most important is that you want to know what you can afford. It's so much fun and tempting to get on Zillow and drool over your dream home. If you can't actually afford a property, why set yourself up for disappointment?
- Get an agent. Although some people believe they can "do it themselves," having a professional real estate agent is crucial in buying your new home. An agent will help you negotiate in ways you may not be aware of: wouldn't you want to get the best deal possible? Working with an agent can also help prevent you from falling into some of the common pitfalls that trap unsuspecting consumers.
As of our meeting, Michele told me that interest rates are still quite low:
- 30 year fixed for someone with great credit can lock in somewhere around 4%
- FHA and VA rates are around 3.75%
It is true that rates have been low lately, but Michele says that a healthy lending climate will hover somewhere between 5 and 7%. The current low rates are great for deal seekers and anyone who is looking to refinance. But, as the economy improves, rates will creep up to the healthy zone. Don't panic, it won't happen overnight! It is important to keep these facts in mind going forward: higher interest rates as well as items such as HOA fees and PMI (Private Mortgage Insurance: this fee is tacked on to your mortgage when you make a down payment of less than 20%.) can affect your DTI (debt to income ratio).
Is your head spinning yet? It's kind of complex, so be sure you select a lender with whom you communicate well. Some people will finance with their bank, since their own bank has access to their accounts and already has an established relationship with the consumer. One limitation of selecting your bank to finance your home is that they may only offer one product and lending option. If you go with a mortgage broker, they normally work with a multitude of correspondent lenders, which are independent investors or banks who will ultimately end up handling your mortgage.
Bottom line is this: getting a loan for your new home IS complex. But, don't be afraid. A competent real estate agent can assist you in finding the right lender to guide you through the process and put you at ease. I'd love to help YOU in any way I can, so don't hesitate to ask me about the first steps in finding a lender. You're WORTH it!
Thank you to Michele for all her knowledge. If you have questions on what you need to do to get a mortgage, contact her today: