Real estate and mortgage lending are two sides of the same coin.
Agents and lenders share a common goal: to help clients navigate and prepare for what may be the largest purchase of their life. That’s been a challenging task in 2021.
In the 16 years I’ve spent in the mortgage industry, this year has been one of the most interesting.
Mortgage rates are low for now, but experts are predicting a gradual rise. That presents great incentive for homebuyers of all ages to jump into the market and upgrade their house or make an investment for the first time. However, housing supply also is very low, which means real estate agents are faced with the challenge of making their client’s offer stand out from all the rest.
One of the most important ways to do that is provide a prequalification letter from a mortgage lender in the offer. Mortgages are large investments and long-term commitments, which makes the prequalification process intimidating and stressful for many clients. There is added pressure for that approval process to move quickly these days, which makes the relationship between the lender and the agent crucial to the success of the client, especially if that buyer is new to the world of mortgages.
First-time homebuyers sometimes start with a real estate agent before they talk to a mortgage lender. Since agents are the first line of defense in this case, they should introduce the mortgage prequalification process by informing their clients of which financial documents they should expect to need as they move forward.
This can really speed the process along for the mortgage lender.
Those documents include: the last two years’ W-2s and/or 1099s; statements from bank accounts, retirement accounts and other asset accounts; divorce or separation agreements, if applicable; credit history; and the contact information for past landlords.
Prequalification also is important for clients who are selling their homes. I’ve had customers who received offers within the week, if not days or hours. That quick sale could end up forcing them into a rental property for the period of time it takes to close on their next house. Real estate agents can help prevent their sellers from being blindsided by making sure they are prequalified for a loan on their next home before listing their current residence.
It truly is never too early to start the prequalification process. However, the client needs to keep their finances stable once they apply for a loan.
Here’s why: Some loan programs require that lenders pull what is called a soft credit report within 10 days of closing. This report indicates changes in credit balances, new collections reported to the credit bureaus and alerts the lender to new credit lines that have been opened. Prospective buyers need to avoid doing anything that would change their debt-to-income ratio – so no opening lines of credit for new home items like furniture or appliances.
These actions essentially could cause someone to no longer qualify for their home loan.
Opening new lines of credit, buying a car and changing employment in the middle of a home purchase are all surprisingly common mistakes mortgage lenders see every day. Mortgage lenders and real estate agents should be a united front as they guide clients through the do’s and don’ts of the process to increase the likelihood of a successful deal – and a happy client.
Despite all its challenges, the housing market remains a great opportunity for buyers and sellers right now. As long as the client has the stamina to persevere through rejections and the prequalification letter is ready to go, I recommend that they stick with it. They may end up making multiple offers on multiple homes before they find their dream home, but it will all be worth it in the end.
Jami Dressler is a mortgage lending supervisor for Arvest Bank in Springfield. She can be reached at firstname.lastname@example.org.
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