Buying a home can be an intimidating process if you have never done it before. Many buyers don’t know where to start or what they should do first. With a little bit of direction and starting out the right way, the home buying process can be fun and exciting. How smooth the transaction goes, will depend greatly on the team the home buyer chooses. It may not seem like a home buyer needs to have a team, but they do. They need an awesome real estate agent, a great lender, a good home inspector and a decent title company. While this process sounds complicated, one good person on that team can help you find the rest of the team. We are real estate agents in Greeley, Colorado and a little biased, but I feel a great agent is one person who can help set up the rest of the team. That brings us back to what is the first thing a home buyer should do?
What is the most important thing a home buyer can do?
You may think I am going to say choosing a real estate agent is the most important thing a buyer should do, but it is not. The first thing a home buyer should do is talk to a lender. If a buyer cannot find or does not know a lender, they could get a referral from an agent. But, I do not think home buyers should look at houses, choose a neighborhood, or even decide on a budget before talking with a lender.
Why is it so important a home buyer talk to a lender first?
A lender will tell a buyer exactly where they stand. How much house they can qualify for and if they have any problems they need to fix with their credit. Many buyers are scared to talk to a lender because they know they have credit problems. However, even if a buyer has credit problems, a lender can help them fix those problems faster than a buyer could on their own. A lender could even fix credit problems faster than a credit counselor in some cases and not charge you any money in the process.
Why can looking at houses before you talk to a lender create problems?
Many buyers want to start off by looking at houses and then figure out the financing. In most cases this is a very bad idea.
- False expectations: I have shown many houses to buyers who were not qualified for a loan. The problem with not being qualified for a loan, is they have no idea what they can afford. They may start looking at houses that are too expensive for their budget. When they find out they can’t afford the houses they have been seeing, it makes it much tougher for them to find a home they like.
- Cannot buy the home they love: It takes time to get qualified and many sellers will not even look at an offer if the buyers are not pre-qualified. If a buyer sees a house they love, but have to wait to get pre-qualified they may miss out on that home.
- Make a mistake with their credit before buying: Buying a car or putting anything on credit before you buy a home, can destroy your ability to purchase a house. Lenders will tell you exactly what to do and what not to do to keep your credit stellar.
What does it mean to be pre-qualified to buy a home?
When a buyer talks to a lender, that lender will look at the buyer’s financial position, and decide if they can qualify for a loan. Qualify does not mean the buyer is approved for the loan, but means they should be able to get a loan barring no unforeseen problems. The lender can also tell the buyer how much they can qualify for. When the buyer gets pre-qualified for a loan, the lender will provide a letter stating they are qualified. Many sellers will not even consider an offer, until they have a pre-qualification letter.
How can you find a lender?
There are many ways to find a lender. You can check with the bank you have accounts with or ask friends and family. I personally think a real estate agent is the best person to ask, if you don’t already have a great contact for a lender. There is a huge difference between the lenders available. Some lenders are great, offer many products and others are not so great and only try to up sell you to their own products. Real estate agents work with lenders all the time and have personal experience with how good or bad particular lenders are.
Any lender you use, has to be on top of their game, a great communicator and be a team player. I have dealt with many lenders, who did not take their job serious and they ended up costing the buyers money and the house they wanted. Just like real estate agents, you want to make sure the lender you work with is extremely experienced and has a good reputation. Choosing a great real estate agent, can help you choose a great agent and the rest of your team. Likewise, a great lender can also help you choose a great real estate agent and the rest of your team.
It can be tough for a buyer to talk to a lender before they buy a house, but it is the best first step they can take. It will eliminate frustrations and if there is a problem, they can get it fixed much faster than waiting until the last minute to talk to a lender. Our team would be happy to put you in touch with some great lenders we work with.