What To Say When You First Contact A Lender

How to Get the Best Mortgage Series  – Week 1

Follow this series to learn how to get the best mortgage for your specific financial situation and goals.  You’ll see what steps you need to take throughout this process to make it productive and successful!

This week’s article is all about what to say when you first contact a loan officer.  And, guess what?!  It’s not “How much can I be approved for?” No, no! 

Most people can get pre-qualified for much more than they want to spend. When we work together, we discuss your personal budget and stick to your goals so you know what price range you should be shopping in even before you begin your home search.

Decide Who To Work With

In a previous article, How to Choose The Very Best Buyers Agent For Your First Home, we discussed a few things to be mindful of when you select an agent to represent you — ask for recommendations, make sure they are equipped to work with a buyer like you, to find someone who puts you at ease and communicates clearly!

It is good to follow a similar process when you look for a loan officer to work with. Not all loan officers are created equal! Do your research and look up the loan officers reviews. Ask your real estate agent what kind of reputation their company has — this will be important to the seller and listing agent when you submit an offer. Ask them their availability — will they be available evenings or weekends if you need to get an offer in?

Not all banks and lenders are able to offer the same programs. If you are a first time home buyer, make sure you are working with someone who is familiar with the first time home buyer incentive programs and stays up to date with them!

I always recommend doing your due diligence and speak with a couple of lenders just to make sure you end up with the best fit for you and your needs!

Be Prepared 

You may already know that you will need to gather financial information for your loan officer to review. The minimum usually consists of — pay stubs, bank account statements, W-2s, photo ID, tax returns, and information on current loans and credit lines.

In the first call, you can expect me to ask a series of questions to gain a better understanding of what you want out of your home. Things like — What is your main motivation for buying a home? How long do you intend to own the home? What is your timeline; if everything worked out perfectly, ideally when would you like to be moved in? Where do you want to live? What type of home are you interested in? How much do you feel comfortable spending to purchase the home? And so on…

We start off this way so that I can narrow down the best loan options for you, loan options that truly match your budget based on the timeframe you intend to live there. It’s okay if you don’t have all the answers to every question right away. I can help you with them!

Focus on Monthly Payments Not Price

We will look at how much you can afford by comparing your total monthly income and total recurring debt. This is how we determine how much of a monthly mortgage payment you can afford. However, how much you can afford isn’t the same as how much you want to pay per month.

Many buyers will make a blanket statement — “I want to spend $400,000”. However, when asked how much they want to spend per month, it’s often much lower than the price range they start with!  

That is why it is so important to nail down your budget before you start seriously looking for homes. You don’t want to fall in love with a home that is out of your comfortable monthly budget. That’s when I see buyers trying to reason and see how they can stretch to make it work. This is a recipe for buyers remorse!

We always focus on monthly payments first and then back into the price. Keep reading to see why this system is better! 

Backward Is Best

First determine what monthly payments you are comfortable with. By working this way, we can make sure we show you loan options and price points for an amount that is equivalent to the monthly payments that work with your budget.

By breaking it down to the monthly level, you’ll have a better understanding of how much you can afford and also be able to take into account the other regular costs when owning a home – property taxes, insurance, maintenance, utilities, HOA fees.

Going backward is the one and only way to make sure you get the house you want for the price you want.

Mortgage Rule of Thumb

When calculating your monthly budget, there’s a rule of thumb you should keep in mind: Every $10,000 in purchase price usually adds/takes away roughly $50 per month. This can vary a bit depending on your loan amount and interest rate. This makes it easier to find that perfect balance between the funds required for purchasing a home and your monthly mortgage payment.

Same Purchase Price – Different Monthly Payment

Here’s another reason you never want to begin with a blanket price. Even if the purchase price is exactly the same, your monthly payment could be very different between two properties.

For example, the monthly payments for a $500,000 condo will be completely different than for a $500,000 single-family home. There are different costs you’d need to consider for each option, such as HOA fees and homeowners insurance.  Monthly payments can vary depending on where and what you buy. By focusing on that, you’ll know if you can really afford a home or not.

The goal of this series is to help you see that there are a lot of options out there, that it’s not a one-sized-fits-all “thing” to get a mortgage and there is a lot to know.  I’m here to help you navigate the options and point you in the right direction based on YOUR current financial situation and goals.  The advice I give one client might be different than the advice I give another client because their situations may be completely different.  That’s how you should approach getting a mortgage too—look at YOUR specific situation, not what anyone else is doing and make the best choices for YOU.

Let me know if you have any questions. Look out for next week’s topic: “How Much Do I Need for a Downpayment.”  So stay tuned!