What not to do when buying
Buying a home? Let me share a bit of simple, practical advice that will reduce stress, lighten your load and leave you smiling as you walk out of closing. I could write a book on what TO DO during the loan approval process and on the day of closing. But I have decided to use this space to concentrate on what you absolutely should NOT DO.
Do not select an out-of-town lender. Every loan is different, causing lenders to work differently with each borrower to coordinate their specific details leading up to closing. If you are buying here in unique Santa Fe, don’t even think about selecting a lender in Montana, for example, much less the internet. It just doesn’t work! Not if you are planning to be true to our goal of leaving a closing happy. We’re not called “the City Different” for nothing. Local companies have a distinct advantage due to the opportunity to meet face-to-face to discuss each specific aspect of the loan. Problems can be identified and solved on the spot. Appraisers and inspectors can be called in to discuss their views on matters of value and on repairs. Good, solid and constant coordination is the key to a smooth closing. Use a lender that you can reach out and actually touch.
Do not acquire additional debt during loan qualification. During this time, a new car loan can be just enough to prevent you from getting the best mortgage product available. Increased credit-card debt can also become a hindrance. Incurring more credit-card debt while a loan is being processed can lower your credit scores faster than any other way.
Do not include the cost of furnishings and furniture you wish to purchase from the seller in the purchase price, nor in the purchase agreement. Although it seems reasonable that such items could be financed right along with the home, it can’t. If it mistakenly appears on the contract as part of the purchase price, the contract will have to be redrawn. Your Realtor is aware of this, but it always helps to be up on these little details prior to taking the leap.
Do not change or quit your job prior to loan approval. It is common, in a second-home market such as Santa Fe, to find buyers who are retiring from their jobs with the intention of spending more time here. But the buyer is far better off applying for a loan prior to retirement. Underwriters favor applicants with jobs.
Do not try to take matters into your own hands during the qualification period. You
will be tempted to judge the importance of items requested by your loan officer. “That is silly,” is often heard from borrowers who begin to feel bogged down in the minutia. Resist! Bite the bullet and just keep it coming, trusting that your loan officer is merely responding to the demands of the underwriter and is on your team.
Do not put off closing if you don’t have to. Interest rates are hard to predict, and a delay in closing can translate to a higher interest rate. Some closings have to be set far in the future for many reasons. However, if it is not necessary, schedule the closing as soon after final loan approval as possible. A “normal” closing date takes place 30 to 45 days after the purchase agreement is executed.
Do not “shop around!” That’s smart when purchasing a new refrigerator, but often deadly when applying for a loan. Interviewing five mortgage companies, resulting in running five credit reports, is hurtful to your final goal. Frequent inquiries can lower those all-important FICO scores used by all underwriters making their determination.
Do not get a divorce! Easy for me to say, right? The purchase or refinance of a home is sometimes contemplated in conjunction with a divorce. Wait! It is far better to complete the financing of the home prior to the actual filing of a divorce. Don’t forget that I am merely offering advice on the “do’s” and “don’ts” of obtaining a mortgage loan. I see more “don’ts” every day. Thus this plain-spoken, down-to-earth article.
Do not refrain from being in town a few days prior to closing, if possible. Your lender may need last-minute documentation to complete the loan. And, of course, when possible, attend the closing. Shipping the closing documents out of town will delay the closing by two or three days. I attend every single closing with my clients. Often, explanations are needed, problems are addressed and issues are solved at closing. This practice is one I have followed for the last 25 years of representing borrowers in Santa Fe. I believe that after conquering the past 30 to 45 days together, we should stick it out until the very end. I hope you will heed my “what NOT to do” advice, so that next time, our entire team can leave closing smiling from ear to ear.
Jim Gay, a real estate broker for 30 years, has been a consultant to Fortune 500 companies. He is currently a broker/owner of The Mortgage Place (505-986-9080) and can be reached at jim@ jimgayhomemortgage.com.