I am a broker who is well positioned in the local marketplace. Because of that I am usually contacted several times a day by people wanting me to make appointments to show them properties and make offers before they even talk to a lender about home financing or verify they have the cash to buy any property. That is not the way the professional real estate business works. You can easily find other agents who’s experience leads them to think real estate transactions are supposed to be a series of hazards, headaches, and obstacles or you can work with me and follow simple steps to create a professional transaction. Making sure you have the money in place is the first step, but one that is too often blundered.
Before we set up any showing appointments:
- If you do not need home financing and are paying cash, you will need your bank to prepare an evidence of funds letter to accompany our offer on the property and to show me you actually have the funds as well. Banks are happy to print those up for good customers like you. People have tried to lie to me about their finances in the past just to get the luxury home or investment tour. Some sellers will not let a buyer on the grounds of a luxury home without first proof they can afford it. Don’t be offended, we will do the same thing when you have me sell it someday. Be sure you have the cash available to pay closing costs as well which I can help you determine. If you are writing a check from a line of credit, fund or something similar, that is still cash and we would need a letter showing your line is open, sufficiently large and available to you.
- If you are going to use home financing, you will need to talk to your lender before we schedule on site showings and have them approve you for the general loan amount. That means you will need to tell them what you have in mind, show them some of the price figures and properties if needed which you and I will discuss before you approach them. You must then provide them with all of the information they need to submit to underwriting so you can get the loan commitment very soon after we have an accepted contract on a property. That means you give them your tax records, asset documents, whatever they need. You do not give that information to me, I do not want or need it. The lender will then give you a very professional letter on their letterhead which you will give to me that states you have submitted all of the information required to obtain a loan for “X” amount and your information has been completely submitted to and approved by their institution with certain exceptions like the appraisal, survey, insurance, inspection results, sales contract and such items related to the actual home and transaction that we can not provide yet. That letter will accompany the offer when I present it to the sellers. You can provide all the information and ask the lender how much you are approved to borrow and they may give you an upper price limit, but the more specific information you can provide the lender, the better the information you will get in return. Without working closely with your lender your answer from home financing underwriting may not qualify as an actual approval but instead just a pre-qualification which will not work for us. If there is any additional issue that comes up in underwriting your lender should be able to resolve it quickly with you if everything else has been done properly. If you are only home financing a small part of a purchase you need to show evidence of the funds to close as mentioned in the “cash” section above for the cash portion. Don’t even think about asking to make a contract contingent upon the sale of your current home unless you have enormously overwhelming evidence that the other transaction is about to successfully close.
Why is this all so important? Because most sellers now will not look at an offer without this evidence or home financing approval from the bank. I don’t blame them considering how difficult it can be for even well qualified people to be financed. Even if it is not difficult, it can be time consuming and time is always of the essence in a real estate contract. Sellers do not want to take a property of the market unless they know the person can actually buy it. In the past, anyone could get quick, easy financing. There are still people out there who do not realize those days are gone and go shopping for a home when they can not even finance a car. This is the reason I can not physically show homes before we address home financing and one of the two above conditions are met. It is completely unfair to the sellers and my busy schedule if you are not qualified. If you need advise on a good lender, I will recommend several excellent professionals who you can speak with and will take good care of you. I do not pretend to be a lender myself, I already have a good job. If you have the cash, you have the easy job. The bank can fax or email me what we need in minutes. Many banks are in trouble and I have had fully approved buyers have their loans denied in underwriting for no fault of their own. Chase Bank just recently did that to a very well qualified buyer of mine. We changed lenders and closed, but the closing delay was over a month. Just another very important reason to have the right agent like me to smooth over these types of contract difficulties.
Buying or selling property can be a lot of fun and a great experience, if you do it right. Otherwise it can be a very costly, hectic and even legal nightmare. These home financing requirements are important steps in handling your transaction properly. They are not the only steps, they are your first priority.