While real estate agents have a great deal of practical experience to offer in the finance realm, they are not mortgage lenders. That means that they are unable to give you advice about which mortgage to choose or how you should finance your home purchase.
However, real estate agents are great connectors and they can put you in touch with a number of professionals who can help you through the process. In the meantime, they can help you better understand and evaluate your options and come up with decisions all along the way that work for you and your family.
Since the financing of a home purchase is generally the most complex element of the transaction, it is important that you discuss your finances and financial needs with your real estate agent upfront. What follows are ten questions you might want to ask your real estate professional—along with some insight into their possible answers.
Do you have any lender referrals for me?
Your real estate agent or broker probably knows practically everybody in your market, including a variety of excellent lenders and mortgage brokers. He or she will be able to refer you to several. You will probably want to compare three different lenders in order to get a sense of what your options are and what products they offer.
How should I choose the right lender?
Your personal financial situation will go a long way in determining which lender is right for you. There are lenders who specialize in working with first-time home buyers, buyers with poor credit, self-employed buyers, and more. Talk to your agent about your specific needs, and find out which lender is best able to help.
How early should I start preparing for the mortgage approval process?
The answer will probably be “yesterday” since it’s never too early to start thinking ahead to your mortgage application and approval process. You will almost certainly want to check your credit reports, pay down debt, and improve your credit score as needed. However, you will not want to actually apply months ahead of time, since rates will change and different options will become available.
How do I find out how much house I can afford?
At this point, you will probably want to settle on a lender and undergo a pre-qualification or pre-approval process, depending on how ready you are to begin your home search in earnest. What’s the difference?
- Pre-qualification is based on information you provide to the lender and can give you a quick idea of your home search budget.
- Pre-approval is more detailed and involves submitting your application and documentation to your lender in order to begin the underwriting process. This is an important step as you will want to submit your pre-approval letter with your offer on a home.
What should I be careful about during underwriting?
You’ll want to make sure that your financial history is as clean as possible, so avoid insufficient funds in your checking account and don’t open new credit accounts. If you are contemplating any major changes to your job or financial picture, talk to your real estate agent first and find out whether they could affect your purchase.
What options are available if I need to sell a house then buy? I don’t have enough for the down payment without the sale.
Your real estate agent can connect you with a lender who specializes in bridge loans, designed for exactly this eventuality. Alternatively, he or she may be able to help you navigate a 1031 Exchange or other alternative option. Be sure you talk with your agent about the funds you’ll require as you price your current home, and what your true bottom line will be.
As you continue through the process, you may want to discuss rentbacks or other options to help your timelines sync up and smooth the transition between homes.
Can I get help with closing costs?
If you know that you will need help with closing costs, talk to your real estate agent about how you can structure your offer in order to ask for seller help at closing. This will often involve offering a higher sale price to make up some or all of the difference.
Are there grants or programs to provide down payment assistance or help with closing costs?
Your real estate agent should have a good understanding of ways to obtain assistance. These may be specific to a particular neighborhood, they may be part of a builder’s offer, or they may be based on your place of employment, financial history, or other factors.
Can you explain any contingencies related to the finance process?
When you make the offer, your real estate agent will discuss with you the various contingencies that you can attach to the transaction, including a financing contingency and an appraisal contingency. There will be various options available so it is important for you to ask your agent how these will affect both the strength of your offer and your own protection during the process.
Are there any alternatives to a traditional mortgage loan?
If you are looking for an alternative financing option like seller financing, rent-to-own, or an exchange scenario, be sure to discuss this with your real estate professional early in the process. This will allow him or her to connect with colleagues and investors in your area to help you find the property that fits your needs and your pocketbook.
Remember, your real estate agent or broker has a fiduciary duty to protect your financial information. You do not need to share bank statements, credit score, or other information, but whatever information you choose to share about your circumstances will be held in strict confidence. Take advantage of the perspective and insight that they are able to provide so that you can better understand the process and make more informed decisions.