This is Part 1 in a series to help you understand the process of buying a home, specifically, getting ready to buy a home in Los Angeles: The Lender.
Getting Ready to Buy a Home in Los Angeles
Before you even start the process of buying a home in Los Angeles, maybe even before you find your Los Angeles Realtor®, you will need to talk to a lender.
If you don’t have a lender your Realtor® will be happy to provide you with recommendations. They will direct you toward those who understand the Los Angeles market, with whom they have worked in the past and who they know are responsive. The one thing you don’t need in a process with strict timelines is a lender who does not communicate, or doesn’t understand the local market. The lender is pivotal to a successful real estate deal. Getting a loan approved can be an arduous process with surprises along the way.
Why do you need to talk to a lender? Because you will not be able to make an offer on a property without a pre-approval or pre-qualification letter from one. It will not be accepted. And these days you may find that the seller wants to see an actual pre-approval of the loan meaning the underwriter is involved and makes you a much stronger prospective buyer. Also, even though you may think you know what you can afford, you may be surprised. You may not be able to afford as much home as you think, or maybe you can afford more. Also, you need to be one hundred percent ready to go, because if you are in competition with other buyers, some of whom are likely to be be cash buyers, your offer will not be considered. Learn how to compete with cash buyers.
Your lender will sit down with you and discuss the various loan options available and help you decide which one is best for you. You can put more money down which will give you less monthly payments. Putting less than 20% down may incur mortgage insurance payments.
Do you know what your total monthly payments will be for principle, interest, tax and insurance (PITI)? What about closing and moving costs? After talking with a lender you will have a much better understanding of the type of home you will be looking for. Just because you qualify for a certain amount doesn’t mean that you are willing to pay that much. So find your comfort level. Also understand, that the basic “pre-approval” you get from your lender doesn’t mean that you are actually approved. It is more of a pre-qualification based on the information you have provided. The actual pre-approval process will start once you are in escrow and the lender starts the loan application. Many a loan has fallen through because the borrower ended up not qualifying.
Getting solid financial information before you start looking for a home will help you narrow down your search criteria and make you a more educated and successful buyer.
Buying a Los Angeles Home – The Series:
Step 1: Getting ready to buy
Step 2: Why use a Realtor?
Step 3: Define your criteria
Step 4: Start your search
Step 5: Make your offer (about the purchase contract)
Step 6: Be prepared to negotiate
Step 7: Go through the escrow process
Step 8: Taking Title
Step 10: Prepare for your new home
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