Real Estate Questions Answered Here
by Art Santellen, REALTOR®
Note: This is the 2nd installment of a special series of 11 columns I'm writing to teach you everything you need to know about buying a home and getting yourself ready to buy a home.
You will remember that I mentioned that the poor think about real estate differently than the rich. I also mentioned that most poor people fail to have the "ganas" needed to buy a home. Last week, I shared with you the 12 steps needed to buy a home and I started by giving you some tips to help you find a Realtor. This week, I'll discuss the second step, mortgage loan prequalification.
Step #2 - Loan Pre-qualification
No doubt about it. The best way to begin preparing yourself for getting a home loan is to open all your mail. People who "forget" to open their mail usually find themselves "forgetting" to pay their bills. If this habit continues, these people usually find themselves in front of a mortgage loan officer telling him or her that they never got notified that one of their bills was going to collection. These are also the same people who tell the judge they never received the letter telling them they were being sued by the collection company for not paying on their debts. Remember, it's important to open your mail.
I have met way too many people who accidentally discover that their credit is not so bad after all. Usually, they find this out while shopping for a car. You know who you are. You're the people who go to the car lots in Motor City on Sunday evening to look at cars. You notice the sign that says something like this, "Receive an additional 20% off this vehicle if you buy it on Monday." So, you go back to the car lot on Monday and the nice salesperson takes you for a test drive. Then, you're introduced to the "car loan manager" who checks your credit. Yes, you have been a couple months late on a bill or two and a medical account is in collections. "But", says the car loan manager, "you can qualify for that SUV you've always dreamed of owning." So,
you buy the car and make the monthly payments.
Then, flush with your success with the car dealer, you come to me and ask me to help you buy your very first home. I ask you to get loan prequalified and you tell me that's not a problem 'cause you just bought an SUV. If you are really perceptive, you'll notice that at that point I begin to roll my eyes and let out a deep sigh.
I do that because I already know that unless you make tons of money where you work, the chances are that big car payment has just torpedoed your chances of getting a home loan. But, I'm getting ahead of myself.
So here's a rule to remember: if you want to buy a home, don't buy a car. Putting it another way: you can't put a dining room table in the back seat of most cars so don't buy a car if you really want a home of your own.
Here is a brief summary of my pre-qualification rules:
1. Open your mail.
2. Don't buy a car.
3. Now is not the time to declare bankruptcy. You will have to wait 2 years after your bankruptcy is discharged before you can get a home loan.
3. Be nice to your boss. The last thing you want is to get fired while trying to get a home loan.
4. Get plenty of sleep and eat your veggies. That's because you don't want to get sick and miss work.
5. Don't die. Believe it or not, your heirs can buy the house you wanted to buy, however, you won't be in any shape to enjoy your new home.
6. Absolutely be nice to your wife. People who are going through a divorce can forget about buying a home for a couple of years.
7. Pay your child support. You can forget about buying a home for your new wife and her 4 kids, from a previous marriage, if your child support obligation has come to the attention of the local child support enforcement agency.
8. Pay your taxes. Everyone in the United States fears the IRS.... especially home mortgage companies.
9. Pay your student loan. You will have to continue to hang your framed college degree on the wall of your rented apartment if your federal student loan is in default.
10. Get a plastic dish, fill it with tap water, place all your credit cards in the water, and place the plastic dish in the freezer until after you close on your home.
11. Most people I see do not have a traditional savings plan. Rather than advising you to start a bank savings account, allow me to suggest that you go to your employer and ask that an extra $100 a month be withheld from you paycheck for your income taxes. Then, next April, you'll have plenty of money for the closing costs.
After you've done all the things I listed above, pick up the phone book and start calling mortgage lenders. You'll want to shop around for the best rates so pick at least 6 or 7 mortgage lenders. Sprinkle in a few banks and credit unions along with the myriad number of mortgage brokers.
This is what you need to tell them:
1. Art Santellen is my Realtor and he told me you could pre-qualify me for a home loan over the phone.... for FREE.
2. This is how much I earn....
3. This is the total amount I pay every month on the debts I have....
4. I have $2000 in my savings account for closing costs.
5. I have no reason to believe my credit report will contain any derogatory entries.
This is what you need to ask them:
1. How much of a loan can I get from you?
2. How much interest will you charge me for this loan?
3. If I could qualify for a $100,000 loan, what would be my TOTAL closing costs, including pre-paids and down payment?
4. What special government or private programs do you have to help me buy my first home?
Remember, you're going to be saying and asking the same things to 6 or 7 (or more) lenders so keep a record of what they tell you. This is a time consuming job that will give you a headache, so take 2 aspirin and call me in the morning. I need to know what they tell you.
Next week, I'll explain step #2 a little more and we'll get started on step #3, getting loan pre-approved.
Art Santellen is a Realtor® with Heritage Realtors in Colorado Springs. If you have a question you'd like answered, please send them to:
Art Santellen care of HispaniaNews
PO Box 15116
Colorado Springs, CO 80935.
You may also send your question directly to Art via email at ASantellen@hotmail.com.
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