By Seth Feinman - Guest blogger
December 12th, 2018
Purchasing a home can be one of the biggest financial decisions of your life. Educating yourself before you begin the home buying process can help you save time and money down the road. It can also help you avoid costly mistakes. I've put together a list of the top 10 things you need to remember when obtaining a purchase mortgage.
1) OPTIONS, OPTIONS, OPTIONS – As a mortgage broker, part of our job is to provide clients with options. Options they might not have ever heard of, or options they didn’t realize they qualified for. Once a buyer realizes what their true buying capacity is, they can then make an educated decision on what they are comfortable with paying. So early on in the process it is key to work with someone who has many options.
2) TRUST – You must trust the person you are working with. Whether they are your realtor, attorney or mortgage professional, do your research on them first. Take a few minutes to do a Google search, you might be surprised what you find (both positive and negative).
3) DOCUMENTATION – Be prepared when speaking with your mortgage professional. You should have your last two years of tax returns (personal and business), last two years of W2s, 1099s or K-1s, last 2 months of bank statements as well as pay stubs. This is just the normal documentation needed. Some scenarios require less, some require more. But either way be prepared so you can act fast.
4) Time Horizon – When deciding on a mortgage product, one of the most important factors is your time horizon for that home. If you know for sure, or at least are somewhat positive that you will not be in the home for more than 10 years, than maybe a 30 year fixed mortgage isn’t for you. That is just one example of how the product you choose matters based on your time frame in the home.
5) Payment Shock – Many first time home buyers go from living with their family for free or paying rent, to now having a mortgage payment that might be a few times the size of their rent. Make sure to speak with your mortgage professional about what payment you are comfortable with. This way you don’t get to the closing table and realize you have overstretched yourself. Or even worse, close on the home and realize it down the road when you can no longer afford the home.
6) Closing Date on your Contract – This date has a different meaning depending on what state you live in. For example, in New York State, the closing date on contract is actually an “on or about date”. This gives both parties (Buyer and Seller) 30 days from that date. So, be sure to know in advance what the law is in your State, and then make sure to properly plan for the worst case scenario.
7) Keep Every Email – You will receive a lot of emails throughout the process. From your mortgage professional, attorney, lender and others. Save them all! There might be a time you need to resort back to an old email to clarify something or prove your point. Ask for every quote and every option to be emailed to you, even if you have already gone over it on the phone. Again, be prepared for the worst case scenario and you will be properly protected.
8) Cash to Close – This is always a popular question, “what is my cash to close going to be”? The answer is different for everyone. But, if you plan to escrow for your taxes and insurance, make sure to account for the setting up of that escrow account in your cash to close calculation. As well as any possible taxes that might be due on the property when you close. So it is not just your “closing costs” that determine your cash to close, but other factors that require you to have this conversation up-front with your mortgage professional.
9) Mortgage Contingency Period – When you go to contract (again, depends on the State you live in) there will be a clause in the contract regarding a mortgage contingency period. I advise all my clients (no matter how qualified they might be) to have a 30-45 day mortgage contingency period. This period protects the buyer’s down payment just in case something goes wrong in the beginning. A good mortgage professional will know if there are issues pretty early on in the process, but without this clause you could be at jeopardy of losing your down payment.
10) Rate Lock Period – The standard rate lock periods are 30, 45 and 60 days. Many lenders have longer and shorter periods available, but each scenario requires its own analysis. Remember as mentioned above, depending on your State, you might need a longer period of time just in case the seller exercises their rights to extra time. This is why it is key to work with a mortgage professional who works with many lenders so that they can have access to all rate lock options.
This article was written by guest blogger Seth Feinman of Silver Fin Capital. Contact Seth if you have any questions related to the home buying process.
Silver Fin Capital Group LLC
185 Great Neck Road, Suite 304
Great Neck, NY 11021
NMLS No. 41133
Silver Fin Capital NMLS No. 12147
Registered Mortgage Broker - NY
Licensed Mortgage Broker – CT, FL, NJ