Cindy's Blog

In the second installment of the "bringing your "A Game" conversation, I'd like to talk a bit about loans, and how they've changed from the gold rush "glory days" of a couple of years (or even a year) ago.

"No doc" loans really are history.

If you are getting a loan, and the lender or underwriter asks for documentation of what you said- income, retirement account, etc.- provide it, because they wouldn't be asking for it if they didn't need it.

There are still some creative financing options out there, but it is more important than ever to get that info together before hand (meaning, before you really start looking at homes) and let the lender get the ball rolling. This has always been the case, but moreso now than ever.

Why? First of all, you don't (trust me) want to look at homes that are $400,000, only to discover that you can afford $300,000. This seems obvious, and it also seems possible that you might have spoken to a lender, told them what you make, how much you owe, and they tell you that you can indeed afford $400,000. What you often don't see when that's as far as you get in the process, is the actual payment.

So often lenders will approve you based on the numbers, but sometimes those numbers are not really based on real life (at least your real life). Better to actually sit down with a lender and go through the process beforehand. What are you going to find out there?

• How much can you really afford? (The important, payment part)
• What documentation do you need to provide the lender? (You can start looking for it now, rather than waiting until you've found something, and can't find the tax returns from 2 years ago!)
• Are there any anticipated hiccups or are you ready to go? (Do you have to correct anything on your credit, pay off a bill, etc.?)
• Are you getting a monetary gift from your parents, etc? This may make a difference depending on the type of loan you're going to be getting. Again, knowing in advance makes all the difference in the world!
• How much are your closing costs going to be? Even if your downpayment is all saved up, you may be surprised to find that closing costs are often about 3% of the purchase/ loan amount. Do you have that? Or do you need to step down what you're looking for/ ask the seller to provide some closing costs in the contract on the house you do find. You definitely don't want to get surprised with this!
• Make sure, though, that when you discuss all of this with a lender, they give you a good faith estimate. They are required by the state to provide this info to you, and it should be pretty close to what you'll actually pay.
• Most importantly, if you do all of this in advance, you really can focus on finding the home that ideally fits your needs, and after you write the contract, you can spend more time imagining where your furniture will go than you will scrambling for bank statements and tax returns!