Once youve been through the home buying process a time or two, arranging for a new home mortgage may not seem like much of a challenge. Sure, there is plenty of paperwork, but having been down the road makes subsequent trips that much less nerve wracking and prone to missteps.
For first-time buyers, it has never been easier to get a loan that can work well for them because lenders now offer an amazing array of loan programs, according to Jim Merrion, regional director of the RE/MAX Northern Illinois network.
Still, when I discuss the subject with RE/MAX agents around our region, they all note that when working with first-time buyers, its important to offer some basic advice on how to get the loan application process off to a smooth start, Merrion says.
In todays home buying market, where Internet sites, such as our own www.illinoisproperty.com, give first-time buyers full access to the local multiple listing service, we are seeing an increase in the number of first-time buyers who do a lot of home shopping before taking a serious look at what they can afford, Merrion adds.
For that reason, many real estate agents emphasize the importance for first-time buyers of checking out their financing options early in the process.
Kitty Moring of RE/MAX Professional Advantage in Byron, Ill., has been selling real estate for 30 years, and has become a firm believer in getting first-time buyers to put a detailed talk with a lender at the top of their home shopping checklist.
All buyers, but especially first-time buyers, need a clear picture of the size loan they can qualify to receive before they start looking for a home. Few things are more frustrating for a buyer than to spend days or weeks looking at houses, only to discover that the place they really love costs more than they can afford, says Moring. Thats why most experienced agents, and Im among them, insist that buyers at least get pre-qualified by a mortgage lender before getting down to serious house hunting.
Pre-qualification essentially tells a buyer how large a loan they can get based on their current income, current debts and credit rating. Or buyers can go a step further and actually apply for a loan before finding a home. Doing that successfully will get them a letter of pre-approval, which means the lender commits to providing a specific loan amount on any property that meets certain specifications.
Once first-time buyers understand what they can afford, the next big step is to select the lender with the best loan program for the buyers situation.
One of the most valuable services an experienced agent can offer a buyer, especially the first-time buyer, is guidance in selecting a reputable lender, says Merrion.
You want to talk to lenders who are at the top of their game. Some lenders are just stronger than others when it comes to providing service, and that makes it easier for their clients, he says.
When evaluating a lender, the following are the qualities to consider, according to RE/MAX agents:
Overall resourcesseek lenders large enough to offer a full spectrum of programs and services;
Good follow-up skillsthe lender thoughtfully stays in contact with clients and does what is needed to keep the loan process moving ahead;
Keeps promises the lender delivers on the rates and programs they promise to a customer;
Experience as a lenderan experienced loan officer will be prepared to deal with the unexpected; and
Quality support staffa loan officer is only as good as his or her support staff, especially their loan processor.
Another piece of advice that Merrion offers to those shopping for a lender: Dont focus solely on finding the best interest rate.
The lender with the lowest rate today may not have the lowest rate tomorrow. So it is also important to look at the closing costs and level of service the lenders offer, he says.
When it comes to actually qualifying for a loan today, the most common hurdles first-time buyers must clear, says Bernadeta Szczech of RE/MAX Home Center in Chicago, are the need for a down payment and the lack of a solid credit rating.
Fortunately, there are loan programs available for almost any situation, but buyers who have little or no down payment or a relatively poor credit rating will find their loan options more limited and may end up having to accept a higher interest rate resulting in a larger monthly payment, says Szczech. Still, of all the buyers I see, only 1 or 2 percent cant buy because they dont qualify for a loan.
She also stresses the importance of buyers communicating to their agent about their financing plans.
You dont want the terms of the purchase contract to be such that they force buyers to accept a loan with which they wont be comfortable. I want to write into the contract a mortgage contingency clause that includes specific loan terms that are right for my buyer, and that calculation should include closing costs because you dont want to find the buyer is unprepared for those costs when you get to the closing table, Szczech says.
The one issue most likely to derail a loan at the last minute is the appraisal, according to Tom Carris of RE/MAX Showcase in Long Grove, Ill.
In most instances, the appraisal is no problem, but it can be if you are buying a home that is significantly different than those around it. For example, if you are in a neighborhood of $400,000 houses, but the house you are buying is a larger, newer home worth perhaps $500,000, you have to hope the appraiser appreciates the added value, says Carris.
If the appraiser questions the purchase price, the buyers and sellers agents may be able to persuade the appraiser to rethink the situation. If that fails, the lender may authorize a second appraisal, but often that will happen a week or two before the scheduled closing.
The buyers agent really has to stay on top of the situation if the closing is going to be completed on time, says Carris.
Closing the purchase on schedule can be a top priority for first-time buyers if they are vacating a rental unit that already has been leased to a new tenant.
Because first-time buyers often are nervous about making the right choice, they may take longer to choose a home than an experienced buyer. If their lease is expiring, closing the sale quickly is often an important consideration.
Years ago, a quick closingsay in 45 days or lesscould be difficult to arrange, but today its less of an issue, says Bernadeta Szczech of RE/MAX Home Center. Usually, it is no problem to close in as little as 30 to 40 days. However, if you get to the point where you need to close in less than 30 days, time can be a factor. Some lenders have the ability to get the loan processed in as little as three weeks, but others dont. Its just another reason why its important to select your lender carefully, and it is one more example of a situation in which advice from an experienced agent can be a big help for the first-time buyer.
RE/MAX offices lead in real estate sales across northern Illinois and have been No. 1 in residential sales in the Chicago metropolitan area since 1989. In 2005, RE/MAX Northern Illinois had closed sales volume of $17.46 billion.
The RE/MAX network in northern Illinois consists of 4,000 associates and 161 individually-owned and operated offices providing residential, relocation and commercial real estate services throughout the northern one-third of Illinois. The Northern Illinois region is part of the RE/MAX International network, a global real estate system operating in 62 countries. It consists of more than 5,800 independently-owned offices that engage 114,100 member sales associates.
From the Feb. 1-7, 2006, issue