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Whenever I receive a phone call or visit with a buyer for the first time, one of the questions that I always ask is “Have you looked into financing a home yet?”
Sometimes the answer is “Yes, I’m working with such-a-such bank or so-and-so lender and I have a pre-qualification letter.” but more often than not the answer is in any one of the following forms:
“No, Do I need to right now?”
“No but I just want to look at some houses first.”
“No because until I find the right house, I don’t know how much I need to borrow.”
“No because I don’t want to hassle with a lender if I can’t find the house I want.”
“No but when I find my perfect home than maybe you can recommend a lender.”
“No but I have some money saved up and I’m sure I’ll be approved for a mortgage.”
“No because I’m going through the discovery phase of my divorce and I don’t want my soon-to-be-ex finding seeing a mortgage inquiry on my credit report.”
“No but I’ve been paying rent for 3 years so I know how much I can pay every month”
“No but I have excellent credit.”
Well, you get the picture. The problem with all of these answers is that they begin with the word ‘No’. Let me explain why.
For most people the biggest purchase they will make in their lifetime will be their home. Purchasing a home is a huge commitment and not anything like renting a house. As a Realtor, we work with buyers and sellers every day, as a buyer, this is a process that you make not take on too often.
Beginning your home search by going from house to house without first securing financing can be a futile and exasperating experience. How do you know you are looking in the right price range? You may know that you want a 4 bedroom, 3 bath home with a large back yard and 2 car garage but do you know that there are hundreds of homes in Bryan / College Station and surrounding areas that fit that description? You may think that you can afford a home between $200,000 and $300,000 so although that will narrow down the number of available homes to view, what if you’re wrong? What if you can’t get any more than $200,000 in financing or what if you qualify for more than $300,000? It wouldn’t be the first time that buyers were way of mark on what they thought they could borrow.
So let’s assume that we looked at all the houses in the $200k to $300k price range that fit your criteria. We have spent many evenings and weekends, riding around in the car, going from house to house, using gas, being away from our families, putting owner-occupants out of their home for the time that we will be viewing it but then you come across your dream home. It is perfect. It fits all the criteria that you were looking for down to the perfectly manicured lawn, the stainless steel appliances and the dual vanity in the master bath. Now what?
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This is the home for you and you can already imagine yourselves living in it. It’s competitively priced and in great condition, you just know that there will be a lot of interest in it so you are eager to get it under contract and make it your own. So you have your Realtor write up an offer with a contingency clause that you can only buy if you can get financing at a reasonable interest rate. Great you are a ready and willing buyer but are you able to buy?
Several different things can happen at this point.
The seller may reject your offer because they received another one where the buyer had already been pre-approved for financing.
The seller negotiates the terms of the contract even more aggressively because they don’t want to risk taking their home off the market unless you pay full price since you have no proof that you will be financed.
The contract is negotiated, the sales price is finalized and accepted but when you go to a lender you are denied financing or you are financed for a lot less than the amount you need.
Once the contract is negotiated and settled you find out that you can be financed for a lot more than the amount you need and you decide that you want an even bigger home.
You go to your lender and find out that you can only get FHA financing but some of the terms of the contract require closing costs from you that FHA don’t allow.
Do you see where this is going?
Any number of things can go wrong at this point. All of which can result in either you losing your option period money and / or having to go back to the negotiating table which may result in less favorable terms and /or you could lose the house altogether.
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Too often though, you end back on the road looking at homes. All the time that you spent looking, negotiating, worrying and dreaming will be wasted. You may even be discouraged to the point that you just decide to rent or stay in your current home for another year.
In the meantime, the truly perfect home, the one that not only fits all your criteria but also your price range is snapped up by a savvy buyer for great terms and at a great price.
Are you really willing to let your perfect home go because you didn’t securing financing before you began your search? Are you really willing to waste all that time, energy and emotion on a home that you cannot buy?
I don’t think you are.
Take the chance and let me help you become that savvy home buyer. The kind of buyer that says “I got a great home for a great price and for all the terms that I wanted.”
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So the next time I ask “Have you looked into financing a home yet?”, and your answer is “No” allow me to introduce you to our lender and / or our credit repair specialist, as between the 3 of us we can get you into the home of your dreams the first time round.
If you are thinking of buying a home, please contact me!