I hosted a dinner recently for ten people and I was beyond ill-prepared. I had that same feeling I had in high school when I had a paper to turn in and didn’t start it until the night before. You know the feeling, right? I procrastinated. Then I panicked. Then I rushed. It was 4:30 in the afternoon on Friday and I had people coming over at 7:30. To say I was stressed would be an understatement. I went to the grocery store and got what I needed: salmon, chicken, a mixed green salad, brussels sprout, sweet potatoes, pasta and chips and dip. When I got to my apartment, I realized I didn’t have enough olive oil and had to run back out. I had to prepare the meal, clean the apartment, get myself together, and organize a playlist. The shirt I wanted to wear was wrinkled (I went with my second choice), I completely forgot about dessert (who forgets dessert?), and I could’ve done a much better job considering some of the dietary restrictions of my guests. It worked out. Barely. It could’ve been much better, but it got done.
When it comes to the mortgage process, procrastination can be costly. It can cost you money, time, and heartache. There are so many moving parts associated with getting a loan and getting your ducks in a row sooner rather than later, will ensure a smooth and stress free (or as stress free as possible) process. It’s one thing to forget dessert but neglecting to get your finances in order for a home purchase could be detrimental. In this column, I’ll explain why it’s so important to start the mortgage process much earlier than you think you should.
You Don’t Know What You Don’t Know:
After the housing crisis in 2008, mortgage underwriting standards got very strict, and those guidelines are still in place today. Top mortgage professionals will pre-underwrite a file prior to the process starting to ensure there won’t be any hiccups and those guidelines are met. Depending upon the file, the pre-underwriting process can take a day to two weeks to complete. And if someone has a complicated file and they already have an accepted offer or better yet, they’re already in contract prior to even speaking to a mortgage lender, they’re setting themselves up to fail. Having a 10-minute conversation and getting pre-approved, months in advance of going into contract to buy a home, will ensure a smooth process and competitive terms.
Give Me Some Credit:
Your credit score is one of the most important parts of obtaining a mortgage and is the main factor in determining one’s interest rate. The higher the score, the lower the rate, and vice versa. By starting the process early and allowing the lender to run your credit report, you’re ensuring that if A.) you have a high score, to keep doing what you’re doing which will provide peace of mind OR B.) if you have a low score, you have time to fix any issues and clean up your credit in time for when you’re ready to purchase.
This Is My Business:
I feel like a broken record as I find myself telling almost all my self-employed clients that ‘there’s reality and there’s mortgage reality, and those are two different worlds.’ Many business owners will tell me they earn X amount of dollars a year, but when I see their tax returns it turns out it’s X -60%. Their CPAs are writing a lot of their expenses off against their income, and therefore they’re not showing enough income to qualify for a mortgage. Afterall, the bank can only qualify someone based on the income they’re paying taxes on. As tax season is upon us, the smart business owners who are planning on purchasing a home at some point in the future, are contacting us NOW to make sure their 2022 tax returns are acceptable for them to qualify for whatever loan size they’re applying for.
Love Don’t Cost a Thing…But Homes Do
Understanding how your money is allocated for a home purchase is one of the first steps in the process – and the sooner one can have this information the sooner they’ll be able to prepare accordingly. You don’t want to be in a position where you’re forced to sell stocks you didn’t want to, or your forced to liquidate your 401(K) when you weren’t planning to, or you have to make an uncomfortable call to family to ask to borrow funds at the last minute to get a deal done. How much are you putting down as a down-payment? How much will the bank allow you to borrow? What will closing costs be? Are there any reserve requirements and what counts as reserves? These are just some of the questions you should have answers to well before going to an open house.
I spoke to a business owner last week who runs a major company in the financial services industry. He told me he’s not looking to buy something until the spring of 2024, meaning he’s roughly 18 months away from buying a home. I asked him who gave him the advice to speak to a lender so far in advance of when he was looking to purchase. He told me 10 years ago he went through the process and had a ton of issues that he’s looking to avoid this time around. He learned from his mistake. And now we’re putting him in a position to make sure he won’t have any issues when it’s time for him to pull the trigger on his next purchase. You might be 6 months away, maybe a year away, or maybe even three years away, but whatever your situation is, it’s truly never too early to start.
Please feel free to contact me to learn more about the process and how we can help you with your home purchase.
Best,
SN
Vice President of Lending
CrossCountry Mortgage, LLC
C: 973.769.8180
scott.nadler@ccm.com
Personal NMLS385124
Branch NMLS1601092
Company NMLS3029