A common question from potential buyers is how long in advance should I plan if I am getting a mortgage?
Generally, it is never to early to start the process. Many times I hear from a client that they really want to buy something but it will be way down the road due to a situation.
You may not be ready to buy today, but the planning process should start as soon as possible. One of the best things to do is have a conversation with a lender. They can help look at the situation and determine next steps.
A lot of time clients are worried about pulling credit and the effect that it might have. This is not something that the lender needs to do on day one. It will have to be done at some point, but initially, you can just have a conversation and verbally supply some financial data.
This is usually enough for the lender to get a picture of the situation and make an assessment. Some of the littlest things can effect the decision and buying power. One of the largest issues is normally debt. Most people have little control over their income, but the debt can be managed. During the loan process, anything you buy or do can effect the underwriters decision. Sometimes small things can make a large impact. For example, maybe you financed some negative equity into your well-appointed new car loan that has resulted in a huge monthly payment. The lender will look at the amount of money owed and due, and this will work against what you can borrow.
We have seen cases where a client may sell that overpriced car and buy a less expensive car for cash, and that can have a positive effect on the debt. The point is to have the lender look at your current situation and decide if possibly some small changes can help make a big impact.
It is also important not to do anything different from the initial loan process to the closing of the loan. This is not the time to go out and finance new furniture by opening a new credit card account. The best advice is to wait until the loan closes and at that point the credit will no longer be scrutinized. It is also best to talk with your accountant to see if they have any recommendations. Maybe they can amend a prior return or hold over some expenses that can have a positive effect on the tax returns. Most lenders take a good, hard look at the last two years of returns to help verify and substantiate the numbers. You don’t want to tell the lender one thing, and then have them look at the returns and find an issue.
One of the more difficult borrowers are those who are self employed. If this is your situation, take the extra time to start planning. It might be a year or more of making some changes on the books before you have the ability to qualify for the home you want. This might be the time to increase your salary, if you have the ability, and lower the expenses.
Have you taken a look at your credit report lately? This is something that can be a real issue with lending.
Is the report accurate or are there some things that might be reported incorrectly? Some lenders have credit repair sources that can help clean up and correct errors.
Again, these are all things that can take some time, and planning is the best strategy. It is true that you can use any lender you like and any bank you are comfortable with, but I always recommend a local lender. It is generally easier with the time zones and for them to understand the Hawaii marketplace.
My favorite local brokers are the brother and sister team from Pacific Rim Mortgage. The principals Derek and Jodie Tanga have all the tools necessary to help, make a quick decision, and step in with suggestions when needed. They have never let my clients down and always are realistic.
Start the process as soon as possible by giving me a call to chat and get the ball rolling.