5 Things Your Mortgage Broker Wishes You Knew
The financial side of home buying can sometimes feel like a nightmare in which you're stuck in a calculus final that never ends—and you've forgotten the meaning of everything.
PITI (or principal, interest, taxes, insurance)? Prepayment penalties? Contingencies? “Confusing” is an understatement. We're the first to admit that looking for a house is lots of fun—but paying for one? Not so much.
But if you have a solid mortgage broker to help tutor you through the process, you're guaranteed to bring your A-game to the home-buying table. In addition to helping you find the best deal, a mortgage broker is also an invaluable resource for newbie buyers trying to understand how this complex, and often tortuous, undertaking works.
Here's what your mortgage broker wishes you knew from the start:
1. Your broker should be the first one you call
When it comes to financial matters, your mortgage broker should be your first call—and you're probably going to want to keep him on speed dial. He's not there just to find you a loan; alongside your Realtor, he's eager to guide you through the home-buying process.
"I want buyers to utilize me as their go-to person on all aspects of the transaction," says mortgage consultant Joe Petrowsky of Manchester, CT.
When you're navigating the murky, turbulent waters of homeownership (especially if it's your first go-round), your mortgage broker will be able to provide personalized advice geared toward getting you to shore—safely, happily, and without leaking cash.
2. Have a team in place
Part of preparing to purchase a home is "putting a team together so when [buyers] start the process, they're already locked and loaded," Petrowsky says.
So who do you need on your side? A Realtor®, of course, but also a home inspector and attorney, all of which will be handy once closing time rolls around. When you're already panicked about your budget, rising expenses, and just plain moving, not having to worry about finding a reputable attorney or home inspector gives you some peace of mind.
"Wouldn't it be better to already know who you're going to use?" Petrowsky asks. "People without a clear plan tend to have buyer's remorse—they panic, they're nervous versus 'I've got my team in place.’"
3. Understand the rules about down payments
You can't borrow money from a friend, and underwriters will review any large deposits to ensure they're gifts—not loans.
A mortgage broker can help you figure out the best legal way to fund your down payment, but when it comes to financial regulations, things have to stay fully above-board.
"First-time home buyers short of cash think they can take money from their friend and use it and pay their friend back," says Shashank Shekhar, the founder and CEO of Arcus Lending in San Jose, CA. Let's be crystal-clear on this: "You can't borrow a down payment—it's just not allowed."
If you're using gift money to cover any part of your deposit, make sure it's thoroughly documented.
4. Keep your mortgage broker in the loop
Speaking of documentation: Have a lot of it, and share it all with your mortgage broker.
"My favorite clients are the ones who ask me before they do anything," Shekhar says. "Even if they think something is right, it might turn out not to be."
Your broker will be intimately familiar with the financial regulations involved in buying a home, and thus will be better able to liaise between you and the underwriter when issues arise.
That goes for credit problems, too. If you're having difficulty getting approved for a bank loan, try working with a mortgage broker first—and have all your papers in order.
"I don't mind these kinds of challenges," says Petrowsky. "I see it as an opportunity to prepare to be a homeowner. I go through every single item on a credit report and address what needs to be done."
5. Don't make any sudden changes
Once you've started the loan process, don't make any major changes or purchases without speaking to your mortgage maven. And chances are good he'll advise you to wait.
Any large expenditure or financial upheaval can delay your closing—or even result in a decline from the bank. Want to buy a new car? Dying for a spiffy new boat? Or maybe some fancy furniture for your new digs? Buying any of these big-ticket items could put your home loan at risk.
"Be sure your closing has gone through, and only then can you go ahead and make any major new purchases," Shekhar says.
The same applies to new jobs: Even if you get an offer with a significant pay increase, you still shouldn't start a new job during closing. Or even accept it. Try to put it off until after the close.
Many lenders require recent pay stubs (from the past 30 days), so taking on a new role during the home-buying process will mean pushing back the closing date, according to Shekhar.
Think you can hide this stuff from your bank? Many lenders do a verbal employment confirmation before funding your loan, and if they find any discrepancies, it can wreak havoc on your loan.
"Don't change anything from the time you check with your [lender]," Shekhar says. "Don't make any changes to your employment. Don't even put in notice to your current employer."