What is the first step to buying a house?

Listen up, this is budgeting 101. Know how much you can spend before you shop! It is that simple. Although the lending process has many steps of its own; talking to a mortgage lender FIRST, will save you and you realtor headaches and heartbreaks later.

For instance, take this scenario:

Two Homebuyers were looking for similar properties. Four-bedrooms, two-bathrooms, open concept single family home. Two car garage, with a large fenced in yard for entertainment. Their real estate agent quickly found a home with all those features plus more, at an amazing price. So, the agent took both buyers to see the inside of the home.

Buyer A fell in love with the property and wanted to immediately put in an offer. Great! Right? Wrong! Buyer A did not shop for a loan before shopping for a home. They had no idea if they could afford the home. Nor did they know how much upfront cost would be. Although it is not the end of the world and no laws were broken. Buyer A’s real estate agent connected them to a mortgage lender for pre-approval, before making an offer on any home.

But look who came to the party ready to purchase. Buyer B!  Buyer B also fell in love with (get this) THE SAME HOME! Buyer B had pre-approval from their bank prior to starting their search. Buyer B also knew they could afford the home, and they only needed 3% for their down payment. This buyer was ready to submit a full offer that same day.

While the agent was submitting Buyer B’s offer to the seller, Buyer A was sending their lender paperwork to verify work and account information. Long story shortened, the seller accepted Buyer B’s offer, (never knowing anything about Buyer A’s interest) BOOM! Just like that the house was off the market and under contract to be sold to Buyer B.

Real estate agents see buyers jump the gun all the time. They get excited to search for a house, but they fail to shop for a loan before they shop for a home.

If there were two people who were asking to borrow money from you, who would you lend it to? The one who has proof that they can and will pay you back. Or the one who maybe, kind of, sort of, could have a steady job and established credit use here and there? EXACTLY.

I highly recommend going into any purchase being full prepared and confident. That allows you to be satisfied with your purchase. Buying a house can be many things. Fun, exciting, scary, stressful, and rewarding all at the same time. Do not add more stress by jumping the gun. Try to avoid falling in love with a house and losing it because you must still complete step one. You do not want to find out you are approved for a $150,000 loan after you have fallen in love with a $250,000 house.

A good agent will make sure you are pre-approved prior to viewing homes and will refer you to a mortgage lender. They should recommend a few which will allow you to shop around for the best rate and loan for your needs. Your personal bank also has a mortgage lender. This could be a good place to start, if you already have a relationship with your bank. Remember comfort is not always best in these situations. I still recommend shopping around. After all that is the first step in the home buying process. Shop for a loan before you shop for a home.  

Are you thinking about buying your first home? Not sure where to start? Or if you will qualify for a home loan? Let’s Talk!