Getting Through the Loan Process

If you believe everything you see on TV, you'd think that nobody can qualify for a mortgage anymore. And if you've read this blog for any period of time, you've probably heard me say repeatedly that you shouldn't believe everything that you see on TV. The fact is, people are still qualifying for loans all the time. I guess the key thing here is the word "qualifying". There was a time not that long ago when you really didn't have to do much to qualify for a loan. And of course, we all know how that turned out...

So you wanna buy a house, and you don't have a couple of hundred thousand in the bank. Here are a few ideas on how to best get through the lending process so you can get from Point A to Point B:

#1 - Use a local lender.

No, wait, that didn't come off quite right - let's try that again:

Use a local lender!

Much better. One of the most common mistakes that I see from buyers is their insistence on using an out of town lender. They figure that they'll get a better rate (they won't) or that they'll do their friend/cousin/cousin's friend in Omaha a favor and shoot him some business. Maybe they have an out of town bank or credit union that they've always done business with and feel some sense of loyalty. In any case - you want to blow up your deal? This is a real good way to go about it. Out of town lenders are much less responsive, and they typically aren't clued into the local processes and customs. And when things start to get a little sideways - and trust me, that can be very common - you're going to want either yourself or your agent in close contact with someone who is competent. And not of small import here is the fact that the local lender relies enormously on repeat and referral business, and at least in this part of the world that is reflected in their performance. You think that some internet lender cares much about referral business?

#2 - Know your credit. Do you pull your credit report periodically to scan it for potential red flags and incorrect entries? You should. As qualification requirements have gotten tighter, credit scores have become more and more critical. And there are specific cut-off points for most loans, and even a couple of points one way or another can be the difference between qualifying or not.

#3 - Don't argue with the lender, just provide whatever he/she asks for. Even if you already gave it to them a few weeks ago. Give it to them again. And be ready to do it again in a few weeks. And don't be shocked if they come up with something new to ask for a few times through the process. Like I said, we aren't in the 2004 market anymore, so the lenders are really ratcheting down the qualifications these days.

#4 - Lock up your credit cards after you go into escrow. You should get this advice from your agent and lender as well, but just in case they missed telling you this... You need to know that your credit will get pulled again late in the game, right before the loan funds. And if you've gone out and bought new furniture for the new house on credit during escrow, you might just tip your ratios and/or credit score over into "no loan for you" territory.

#5 - Use a local lender. I know I said that already, but it's important enough to repeat.

None of this stuff is brain surgery. Some might argue that things have tightened up a bit too much over the past few years, but I'll be honest: I'd rather be here than where we were back in the days when all you had to do to get a $500K mortgage was fog a mirror in the presence of a loan officer. This is sustainable. This is healthy. Owning a home is something to be earned. It isn't a birthright.