Back with the Agent: the Sit-Down Meeting

If all went well at the first casual meeting, the agent has arranged a sit-down substantive meeting where both of you will get to know much more detailed information about each other. At this meeting the agent will outline the steps in buying a house and explain some of the forms and procedures you’ll encounter on the path to home ownership: inspection reports, the Seller’s Disclosure, handling of earnest money and more. The agent will want to learn as much as possible about your desired neighborhood(s), what type/size of house you want, and how much you are able to spend to get it. By now you should be pre-qualified by a loan officer so you know what you can afford, and the agent should be able to tell you if your wallet matches your wishes.

First Look at Financing

Before seriously looking at homes you need to find out just what you can afford, and how much it’s going to cost you. As Realtors we want to be looking at homes just as much as you do—but first let’s take a quick look at the pre-approval process.

Pre-Qualifying: Conditional Loan Approval
At this stage your contact with a loan officer is likely to be just a couple of phone conversations, where you’ll give information about your income and debt (including all obligations), and you may be asked for permission to run a credit report. Based on this information the loan officer can issue a letter that specifies a certain mortgage amount for which you are conditionally pre-approved. When you find a home you will need this letter in order to make an offer.

Buyer’s Closing Costs
You don’t know the exact amount you’ll need for a mortgage yet, so the amount stated in the pre-approval letter is hypothetical, though within your qualifying limits. At this time you may ask the loan officer for a more detailed look at the costs of your hypothetical mortgage, and receive an estimate of closing costs. The estimate shows your down payment and monthly payment as well as the various charges that make up the buyer’s closing costs, including lender fees, title company fees, and state mortgage registration tax. Several months of pre-paid property taxes and property insurance (and the initial lump sum for FHA insurance) are also considered buyer’s closing costs, as they are put into your mortgage escrow at closing. We won’t take the time to further detail the buyer’s closing costs, but be aware that they can vary greatly from lender to lender, ranging from 2% to as much as 4% of a $200,000 loan. Some of this difference depends on the type of loan and the interest rate, but lender fees can vary greatly as well.

Financing Quick Points
We say again: when looking for a lender, it’s best to start with recommendations from real estate professionals who work with lenders every day. Your agent will know several trustworthy loan officers—and with all the complexity of mortgage banking you will need a loan officer you can trust.

Important caution: if you’re shopping around for a mortgage lender, be sure that you don’t allow every lender to check your credit. It actually will lower your credit score to have it checked too often. This isn’t a problem, however, if you check your credit yourself. Just be sure to use a service that will give you a FICO report (the type mortgage lenders use). Most lenders will accept your information to issue a conditional pre-approval, since it needs to be verified later for full loan approval anyway.
New lending regulations require that lenders re-check your credit a second time within 10 days of closing, so don’t plan on charging the furniture for your new castle (or the boat for the moat!) until after closing.