Professionals have techniques, resources and pieces of information that make it possible for them to do what they do for a living.
As professionals, real estate agents interact with mortgages more often than you do. They apply the techniques, have access to the resources, and learn the information that makes it possible to help their clients get approved for the sale they’re trying to make. Here are six insights real estate agents use to help get you approved for the best mortgage.
6 Mortgage Facts Your Real Estate Agent Knows
1. Location Matters
Some neighborhoods are considered more high-risk than others when it comes to crime rates, economic conditions, and the frequency of natural disasters. But that’s not the only aspect of a location that can impact your mortgage.
Condominiums have different underwriting requirements than standalone homes. Homeowners association regulations can impact the terms of escrow, insurance or the mortgage itself. Zoning ordinances can slow down the process or require extra paperwork.
Local and state laws and the policies of different lenders make this a complicated situation that changes across towns and states. You won’t necessarily know all the details, but you should be aware this is a factor and ask upfront about how the kind of home you’re buying impacts your mortgage proposition.
2. Greasing The Wheels Makes A Difference
One of the lesser-talked-about, but most-frequently used, advantages of working with a real estate agent is their contacts list. While you might have been looking for a good mortgage lender or credit union, your agent has the perfect person for precisely the kind of mortgage you want.
Your agent knows the phone number, how hard the person is willing to work to make your loan happen, and any details that might help increase your chances or lower your rates. He or she may also know an honest inspector, an appraiser who keeps their appointments, two moving companies, and somebody who knows how to fix that weird sound in the basement.
You can know all of these people too. Check your social media contacts for professionals and ask them for recommendations from their contacts. It’s not as straight forward as just asking an agent, but you’ll find you know more people than you might think.
3. The Minimum Down Payment Is Not 20%
We hear this so often many people think it’s a hard-and-fast rule, but it’s not. It’s a guideline. For most loans, if you finance more than 80% of the value, you must pay private mortgage insurance for some or all of the mortgage’s life. If you’re willing to do that, you can sometimes get approved paying as little as 5% down. With an FHA loan, you can put as little down as 3.5%.
If you’re buying your first home, many agencies also provide down payment assistance programs in the form of grants and incentives that can cover some of that money for you. Bottom line: You have lots of options about paying upfront and how to structure that payment.
4. Intent Is Important
A mortgage for a home you plan to live in full time has different rules and approval guidelines than a vacation home. Both are different from a rental property, and all three are different from something you buy for your business.
This is because the purpose of a house changes how well it’s taken care of and how quickly somebody might walk away from the mortgage if things get rough. You’ll be kinder to, and do more to keep, your family home than you will a rental investment. More people will walk in and out of a bookstore than a residence. The more risk and damage a property’s intended usage predicts, the more expensive and harder it can become to get a loan.
Learning the details of this starts with knowing why you’re buying a property. Contact a lender to discuss relevant information and documents that may be required.
5. Mortgage Shopping Doesn’t Hurt Your Credit
This is another misconception based on the truth. Hard inquiries — when a creditor looks up your credit score for purposes of offering or denying you credit — are recorded on your credit report. The pattern of your inquiries over the past 12 months impacts about 10% of your FICO® credit score. Since many inquiries might indicate you’re in dire need of credit and thus suffering financial hardship, it can reduce your score by a few points.
However, a cluster of inquiries for a car loan, mortgage, or student loan at around the same time count only as one inquiry when calculating your credit score. Lenders understand shopping around for credit when making a significant purchase is the sign of a smart consumer, not a desperate shopper.
On the topic of credit, it’s a good idea to pull your credit score about six months before you begin shopping for a mortgage. That will give you time to make any fixes to improve your score.
6. How To Shop For An Appraisal And Inspection
Home appraisals can be a hassle. Most appraisers are busy, which means they have to schedule weeks in advance and don’t seem to worry about canceling or showing up late. When they arrive, they’re required to get invasive with your home. Home inspectors are often the same way. This isn’t something you want to leave to chance or random internet search results in both cases.
A real estate agent knows who’s right in this department. They know who’ll show up when they say they will and who charges a reasonable fee. Although you should never work with an inspector or appraiser who’s unethical, an agent will know who’ll do a thorough job.
You can learn this quickly by asking your social media network. You might not know an appraiser or inspector personally, but you almost certainly know somebody who knows one. Internet forums and review websites can also help you here.
When considering whether or not to use a real estate agent, many people think about their commission and home value. Although that’s important, the agent’s knowledge about mortgages can save you more than that cost over the life of your loan.
On the other hand, you can also use this article as a checklist of things you can learn and independently process.
Timothy Alsop was a real estate agent for a decade and now provides marketing for a wide range of firms.