First and foremost, before you begin your property search, you must know what you can afford, if and how you will qualify for a mortgage, whether or not you will be able to secure the help and assistance of family members or friends with any gift funds and so on.
How Will You Be Financing Your Purchase?
Unless you are a cash buyer or securing full purchase funds by some other liquid means, you will most likely be applying for a home mortgage. This is the most important first step in your home purchase. I typically counsel clients to work with a locally-owned and operated lender. My preference and to whom I refer ALL my clients is Ruby Grynberg, founder and chief loan officer of Salmon Bay Community Lending. She has a proven track record of excellent service, competitive rates… and is a genuinely delightful human being. We have worked together for a decade+. We enjoy an excellent success record in achieving on-time closings and client satisfaction. After all, if you have packed your boxes, lined up your friends and/or movers for the move, ordered the pizza and bought the beer, the last thing you want to hear is that closing has been delayed until the Monday after the weekend you just set aside. So, make certain you are working with a lender, if not Ruby and her team, then someone you trust. I absolutely recommend against working with On-Line mortgage providers, out of state brick-and-mortar financial institutions etc., and for a number of reasons I’m happy to discuss with you. Bottom line, it’s important to know you are not just a numbered file on someone’s desk. When the chips are down, you want to make certain there’s someone you know on the other end of the line.
Are You Pre-Approved or Fully Approved?
This is an important distinction to make. In today’s market and unless you are a cash buyer, you will not be able to submit an offer to a seller without attaching the all-important “pre-approval” letter. I always have Ruby prepare one accordingly. The greater Seattle real estate market has been highly competitive for quite some time, due in large part to predictably low available inventory levels. Working with a proven lender whose reputation is well regarded may often make the difference in whether or not your offer is accepted. To submit an offer without loan pre-approval is a non-starter. Loan pre-approval essentially means you have supplied to the lender general, verifiable employment and asset information providing the loan officer enough confidence to issue loan pre-approval. You will still have to provide many more pieces of information and documentation before the underwriter will issue full loan approval. Many of today’s buyers are all cash purchasers. It’s very difficult to compete with someone who is paying cash. However, full loan approval increases your odds as your mortgage will be subject only to appraisal and title review typically. So, if circumstances permit, providing a letter of “full loan approval” with your offer will put you in a much stronger position. Talk to your lender about the necessary steps to get fully underwritten.
Will You be Receiving Gift Funds, Liquidating Assets or Securing Other Funds for Downpayment?
It’s not uncommon, especially for first time home buyers, to get a little help from family or friends who have the wherewithal to contribute to your downpayment by means of gift funds. Again, talk to your lender about the necessary documentation and/or timelines to secure these funds. Please, DO NOT proceed with writing an offer based on a presumption of gift funds if you are not absolutely certain they’ll be available. If you are liquidating funds from stocks, retirement portfolios or some other means of downpayment financing, do your homework and find out how long it might take to make those funds liquid. While you don’t need them on hand when you have your offer accepted, you must be certain they will be available prior to your closing date and in timely manner. It can take time for your financial/investment institution to cut a check or wire funds. Again, take direction from your lender on how best to secure these funds.
Will You Be Leveraging Existing Real Estate?
Often times, buyers are also sellers. This means you may need to submit an offer contingent upon the sale of your home. In today’s heated market, this may require quick action on your part. Contingent offers require that property you are selling is on the market within five days of achieving mutual acceptance on the property you are purchasing. Please…..make certain you are ready to list your home before you decide to purchase another one. Sometimes life happens and the perfect house pops up when least expected, but in most cases careful planning will help you be successful. As our market is so competitive, writing a contingent offer may not be possible as you could well be competing against buyers who don’t have this hurdle to overcome. You may consider other options which will help you buyer first (bridge funding being an example) before you sell.