Deb Espinoza's Real Estate BLOG

Home Buyers- Don't miss the first and most important step to buying a home today.

While the real estate market is clearly a Buyer's market today with low low interest rates and plenty of distressed homes on the market bringing the values to their all time lows; it's harder than ever for a Buyer to qualify for a loan. Home buyers may not realize that the climate for mortgages has changed DRASTICALLY from days long past. Lenders are reluctant to make another 'bad" loan, and in their quest to properly qualify the borrowers they have gone overboard and the loan process is certainly the most frustrating process of a home purchase today. Now, because most Seller Agents have experienced the frustration of most every escrow not closing on time due to the lender, a good Seller Agent who is looking out for their Seller will require good proof that a Buyer is qualified to purchase. This includes not just a "Pre-approval letter" from days of old; which wasn't much worth the paper it was written on; but most times the Seller Agent will want to see credit scores of all borrowers, proof of funds to close and underwriting conditions.

For Buyers what you MUST do before even looking for a home is to talk with a qualified loan officer and get your initial loan approval completed. This includes providing tax returns, W-2/s,  current pay stubs, bank statements and getting your credit run. The percentage of errors on credit reports is HIGH. If you find out there are errors on your report up front then you will have the time to have your loan officer help you to correct those errors so that not only can you qualify for the loan you want, but you can get the best interest rates and terms. There is almost NO product out there for borrowers with scores below 620. If you are receiving Gift Money for help in purchasing your home; there are NEW RULES as to how this money must be tracked and shown to the underwriter of the loan. The Gift Giver must show where it came from as well. Don't do anything without first checking with your loan officer; paying down or paying off credit cards is sometimes best done from escrow when the loan closes (another tracking of funds that the underwriters want to see), also if you have accounts in collections that are old and you 're-activate' them by making a new payment to them you can seriously damage your scores. You need to work in close contact with your loan officer so that when you qualify on day one, you still qualify when escrow needs to close. These days the lenders will run credit again at the last minute before closing, and call to verify employment and bank funds.

What this means is once you have decided you want to purchase a home, don't change jobs and if it's unavoidable let your loan officer know immediately so they can help you provide a letter of explanation to the underwriter and get approval. Also, don't go buy a car, furniture, appliances, DON"T BUY ANYTHING- until AFTER you get the keys to your new home and are moved in. Serioulsy, if you signed the loan papers and think you are 'safe"; think again. Before the lender FUNDS the loan, they will check you again, and it all can fall apart if they even see a 'credit inquiry' for a car loan or credit card, much less a big purchase to celebrate your "new house". 

Bottom line is keep communication open with your REALTOR and your loan officer. Pre-Approve BEFORE you start looking, know your total approved monthly housing cost; loan payment includes paying back the loan and interest, plus impounds for monthly property taxes, insurance, also make sure you add monthly HOA dues if applicable. Many loan officers will forget to mention this so make sure ahead of time to contact insurance companies for quotes find out what your annual homeowner's insurance will cost and break it down monthly to make sure it fits into your total monthly payment that your loan officer provided. The policy needs to be 'bound' and the quote given to escrow before the closing so the funds can be paid for the entire years cost plus a few months on hold for the renewal at the closing; these will be added "closing costs" to your loan. This can be another last minute deal killer.

In San Diego's current housing market almost every listing by a competent REALTOR will have mandatory proceedures for the Buyer's Agent when presenting an offer. A competent Buyer's Agent will know that all Buyers need to be pre-qualified; completed loan application and verification of income, assets, employment and credit scores; before an offer will be considered by a Seller and their REALTOR. If you don't already have a good loan officer to take care of this for you then ask your REALTOR for a referral. Most REALTORS have a few good loan officers that they work with, so if you need a recommendation let your agent know and they will be happy to provide you with some names.

The home buying experience can be pretty overwhelming, but with the right REALTOR and armed with information and educated on what to expect it's well worth it. The market has never been better with lower than low interest rates and prices down along with a great deal of inventory. With a little bit of homework and a good REALTOR, the dream of home ownership can be yours!