Yesterday I shared my experience of home searching with you all. Today, I am going to talk about the not-so-fun but still very important art of the home buying process: preapproval and approval of getting a loan. Plus what it means to actually buy a foreclosure, because there’s still quite a few of you out there that are adventurous like me and don’t mind buying a “clunker with hidden potential.”
Buyers call me all the time and say “Okay, I am ready to buy a house!” My question for them is usually, “That’s awesome! Have you been preapproved with a lender yet?” There are two groups of buyers: the serious and not-so-serious but want to look at houses anyway because it’s cool to see what you think you can afford. For the serious buyers, typically they have already been preapproved with a lender or bank, and were ready to begin the home search process like…yesterday? The not-so-serious buyers want to hold off on the preapproval process either out of fear of being rejected for a loan on their dream house or they don’t want the “hassle” of having to talk to a lender. My policy as a realtor is to get all of my buyers preapproved with a lender before we even get in my car to go see a house. Why? Preapproval usually only takes the buyer 30 minutes on the phone or in a meeting with a lender. But sometimes getting the actual preapproval letter can take some time. Having that letter in your hands before you begin your home search gives you leverage in negotiations, gets you literally through the front door of your dream home because the seller knows you’re serious, and it saves you time in the long run. Not having a preapproval letter could mean the difference between getting the house you want right off the bat or losing the house to another buyer who was prepared ahead of time. The market is shifting and there are quite a few buyers and not as many houses out there. What does that mean? Bidding wars and the strongest offer (accompanied with a preapproval letter) wins. I become quite attached to my clients and don’t want them to lose their dream home because of a 30 minute technicality. Everybody usually gets really sad when that happens, especially me.
So, before I even began my home search, I got preapproved with a wonderful lender that my mom (and realtor) referred to me, and I was able to start checking out homes the same day. I knew exactly what I could afford and what I couldn’t, so I was able to communicate to my realtor what I needed price wise. I also knew my comfort zone for price per month and knew that yes, I could buy a house for $100,000 but that would I be giving up each month to make sure my payments on the house were made if I hit hard times? The benefit of already having a lender on call for me also meant that once I did find a house, he could work up a good faith estimate i.e. GFE and give me a break down of what my monthly payments would be as well as what my projected buyer’s closing costs. Having Greg (my lender) working for me helped me immensely in negotiating a great price on my little Treehouse. A price that would ultimately win over the bank and win me the house and I would still have my closing costs paid for.
Now on to putting in offers on foreclosures. Here’s what I learned, and many of my clients have had different experiences; but here is what I learned from mine: banks are not people, they are HUGE calculators. When I was thinking of what to offer for the Treehouse, of course I wanted to low ball it. I was young, the housing market had literally crashed about a half year before, and the market was filled to the brim with foreclosures. But my Realtor advised me that also meant there were plenty of investors in the market who did the negotiating with banks for a living and knew all the tricks with the number crunching. For me to get the Treehouse, I had to make a really good offer. No low balling for this kid. So we offered OVER asking price and built the closing costs in. Turned out there was another bidder on the house, however, in the end, I had made the highest and best offer and won the house. There was much cheering and celebrating.
And then came the paperwork. I am not going to sugar coat this for anyone. The home buying process is not a cake walk. There are snags, hold ups, and more signing your name to piles of paperwork than you could ever dream of. Especially if the seller of the house you want is a corporate entity who has paperwork of their own. I cried at least once during the process out of frustration because my closing was being held up on a count of the bank having me sign the same document for the third time. The bank kept losing the documents my lender and realtor were sending them. Golf clap for the bank. However, with the help of my awesome Realtor and brilliant lender and attorney, I did close on the house. Looking back I now realize how much work my people actually did for me to get to where I am now. And you know what? It was all worth it.
Buying a house is like having a baby in a way. It’s sometimes long and really, really hard to get through. There may be blood, sweat, and tears that go into this house before you’ve even bought it. But once you are sitting there at the closing table, signing your name to the very last page of the closing packet, and you look up at your Realtor all bleary eyed so they can give you the key to YOUR house, you forget about it all. All you want to do is run to that beautiful, exciting, sweet thing that is yours, throw your hands up in the air and shout for joy, “This is mine! And I am going to love it so very much!”
And in the words of the Food Lion spokes lion, “That’s just my two cents.”