1. Get Your Financing in Order First!
Even if you’re certain you have good credit and great income, unforeseen problems can and do arise during the mortgage process.
Often these ‘surprises’ can be managed if they’re spotted in time. But if hiccups occur late in the approval process and/or days before closing, that’s when panic strikes.
The US Federal Government directly or indirectly insures, funds, and regulates the entirety of the US housing and finance markets.
Therefore our country’s mortgage industry is one of the most highly regulated in the world.
In other words, getting a mortgage is anything but “Easy”
I often describe today’s mortgage process as “a checklist with 100 boxes… and 99 out of 100 is failing’
Don’t just settle for some strange lender’s oral assurance of the quality of your application. Take the time to obtain a conditional loan commitment.
This is the lender’s written promise to fund your loan once you’ve satisfied all the conditions therein.
This is often referred to as the Desktop Underwriting Findings or “DU Loan Approval”
Ask to review this with your lender and make sure you understand each condition.
Once you’ve seen the written approval and understand its content you can rest assured you’re “in the know” on your financing.
This status is referred to as ‘conditionally approved’ and it’s way better than any “pre-approval’ letter.
2. Maximize your Credit Score
Everyone knows credit scores have a big impact on mortgage terms. But that’s about where general knowledge seems to stop.
Most people just accept their credit score like they do their height. That is, people THINK credit scores are intractable.
Nothing could be further from the truth.
Credit Scores are very fluid and manageable. And by manageable I mean you can often significantly improve your score. Even if you think your credit is ‘good enough’ it most likely can go higher.
With simple fixes like right-sizing the balance on that department store credit card one’s credit and mortgage terms can significantly improve.
The best lenders not only are masters of the mortgage process they are, by proxy, credit score experts as well.
If you are serious about getting the best financing terms make sure to work with a good lender to maximize your credit score before you write a contract.
3. Negotiate seller paid contributions before purchase price
If you’re lucky enough to be shopping in a market that’s softening you may have an opportunity to negotiate terms with a seller.
When this happens begin your negotiating with a seller credit towards closing costs.
Sellers who want to ‘make a deal’ can credit up to 3% of the purchase price towards your closing costs.
3% is the industry maximum allowable closing credit from the seller. Make sure to use it all if you can.
Buyers often overlook how much closing costs can actually add up to. Factoring in lender and 3rd party fees, interest charges, reserves for taxes, insurance, and HOA dues any buyer can easily approach $7,000 in costs on any closing here in Denver.
If you’re lucky enough to have negotiated a seller credit which exceeds all your closing costs, a smart lender will make sure nothing goes to waste. If you know early enough in the process your lender can take any monies above and beyond the amount needed for immediate costs and buy down your interest rate.
4. Don’t skimp or brush off the home inspection
Rule #1, always read and understand the home inspection report.
Utilize the experience of your Agent to remedy any issues. Enlist trusted resources like your agent to know when and for how much you should ask.
As is the case with everything in life, the “when, how, and why” matters. And there’s a right way and wrong way to go about this process. A good agent will always offer sound advice on how best to proceed.
Sometimes it’s better to have work done before you move in. But a price reduction and/or additional seller credits at closing are also advantageous.
It takes the best efforts of many professionals to ensure a happy and smooth closing.
Sometimes things beyond anyone’s control terminate the best of purchase contracts, but if you follow these four tips you can be assured you’ve avoided the majority of trip-ups I’ve witnessed in my twenty years in the real estate business.