When Should You Start the Mortgage Process? BEFORE Looking at Homes!

Hey guys, welcome back to another week of Mortgage Matters in Minutes. I'm your host and owner of Mortgage Specialists, Brent Rasmussen. And today, I'm going to pass on Mortgage Matters in Minutes that I did an hour and plus presentation to a local executive group that I'm a part of and it was very eye-opening for them with some statistics and numbers to see when should you start the mortgage process. And obviously, we always say before looking for homes. And we want to explain why that is because people don't or haven't been recently through the real estate or mortgage process, so might not know the pitfalls along the way of starting well before you are looking for homes because we get it often where people will say, "Well, hey, I'm just looking or I'm not really ready to make a decision or we don't really know yet where we're going or what we're doing." But, I would tell you like anything you're shopping for, once you get out there and you start looking around, it immediately triggers the human behavior of executing and purchasing and moving forward in regards to that. So, today we're going to start about why starting to look early is a big situation for you or why it's more beneficial than waiting until you find a house. We tell all of our clients starting 6 to 12 months in advance is never too early because at that point in time, we really are just sitting down having a conversation talking about your goals, what your income and asset situation looks like, and then most importantly, your credit to make sure that's in line and if we can adjust anything accordingly in any of those categories to make your situation better for obtaining the best mortgages that's out there. But, really what we want to sit down and talk about at the very beginning is what do you expect your payment to be? What do you expect your cash to close to have and then what expect the price range to be in. Where we see a lot of people mishaps is out there looking for prices of homes or real estate professionals already sending people houses that might not be what they're expecting because they're using some online calculator and it's not exactly the same as what real life is going to bring you. So, first start very early that year in advance to get your ducks in a row, know where you're at. And then if you are all put together, all ready to go, yes, we can do a pre-approval right then, too. Or maybe, hey, there's some things we need to work on and before you officially start looking for homes, you want to get that pre-approval. Which that requires for us at Mortgage Specialists to do an application, obtain a credit report, and then also send in your pay stubs, your bank statements, your identification so that we know everything's in line, nothing's expired, there's no red flags, everything qualifies for what will be needed in a loan. So, most people we find wait till they find a house and then they want to back into the numbers. And many times we also will pre-approve people based on what they the max that they can get approved to. And many times the max is not what's the best for the consumer, for the borrower. They might have different lifestyle expectations, they might have different budgeting expectations. So, what you get pre-approved to doesn't necessarily mean that's what you should spend. So, sitting down 6 to 12 months in advance and start thinking about these things because you might be going from an apartment to a home and when you go from an apartment to a home, now you might have extra expenses like maintenance or maybe certain utilities or communications that aren't charged at the apartment complex. So, there are different added extra budget items that you might need for lawnmowers now, snowblowers, you know, different things that go with a property that you might not have had living in an apartment or renting a house in that regards. Because what we also find if you're not pre-approved before you start going and looking, it's more of an emotional decision and you like the houses, but it might not fit into your budget going backwards. So, if you are just saying you're looking, still reach out to someone and have a conversation. We would love to help with that here at Mortgage Specialists of just talking through numbers, what they look like, sit down for 10-15 minutes. It doesn't have to be that much. It can be a phone call. It can be a conversation of here's kind of the rules, here's where you fit at to make sure you know what the numbers are going to really look like before you're just out looking. Next thing you know, you're signing a contract to compete against others because someone else wants that same property. Where on the pre-approval piece, we are going to look at scenarios that also say, "Do you qualify without having to sell your house? Do you qualify with just one person's name?" We look at all the situations, but many times if we're in a rush and you're out looking and it's a Friday or Saturday, we don't have as much time to maybe catch every single situation that we're not aware of. Because when we do get applications in from consumers, they might not be fully complete or there might be something that we're missing and we don't get a chance to talk about it because we're all up against time to get you a pre-approval to put in that offer. And not that we're not educated and we're not experienced to know the things that are there, but giving yourself time leaves room for options that may allow for a lower down payment, may allow for a cheaper interest rate, and/or cheaper mortgage insurance, which would all lower your monthly obligation. So, giving yourself time is truly going to save yourself money in the long run and meet your expectations where we've seen a lot of individuals move into a house and later have to move out because it's not something they truly want to afford in their budget. One other additional item that you can is throughout the pre-approval process or even after the pre-approval process, continue to update numbers. If interest rates change, if the houses you're looking at have more expensive property taxes or more expensive house insurance, those are things that we can work with you on to communicate to say, "Yes, if you're looking at this house or this house, here's how your payment adjusts." Because when we start our conversations with the pre-qualification or a pre-approval, we have to assume certain things. We have to assume a certain price range that you're in to calculate a payment. Because a pre-approval is always based upon how much payment you can afford, not really how much home price. So, we back into a payment on the price, but we also have to estimate house insurance and property taxes, which could be different anywhere among the city, the rural, the urban, anywhere you're looking might be a little different than our assumptions. For whatever reason, every so often we'll see a house tucked in a certain location that has very inexpensive taxes or insurance. If we're basing our pre-approval off of that, it's not going to be fair if we're looking in other neighborhoods for that same priced home. So, again, the more you can plan in advance to have conversations, to continually look at numbers, then after putting an offer in, it's a little less stressful as well, too. You don't feel like you're running as fast as possible because from there we still have to get updated paperwork and get an appraisal going and loan disclosures and lock agreements and title work back, appraisals back, and then finally get all the closing disclosures and closing documents put together for you to sign at closing. There's a lot of little things that happen along the way that if you don't do it every day, you wouldn't know. But again, start talking with a lender about a pre-approval before you go house hunting. You don't have to do the pre-approval, but at least have a conversation so you're aware of the steps and the paperwork that you need. I'm Brent Rasmussen, owner of Mortgage Specialists, here to help you at any time assist with your pre-approval needs or mortgage needs or any kinds of questions as they affect real estate in regards to lending. And we're just a phone call away at 402-991-5153 or check us out on our website at mtg-specialists.com. Have a great week. Mortgage Specialists driven, trusted, reliable.