If you’re looking to purchase a home in the current real estate market, where homes are selling to buyers offering quick closings and cash deals, your first conversations should be financial ones, with your real estate agent and a lender or mortgage broker.
Mary Kathryn Perkinson has been in the mortgage business since 1988, owning her own firm, MAK Financial Group, since 1997, while Ovell Robinson has been a Realtor for two years, fulfilling a long-held dream of helping people realize the benefits of home ownership. Their advice:
Mary Kathryn Perkinson
Contact a local lender. “Engage with a local lender, because national firms are huge call centers that don’t know the local market. Plus, those firms’ online assessment tools don’t always give accurate results, because people sometimes input inaccurate financial information by accident. In this market, if you have a pre-approval from a national bank, the seller’s agent will often say no. A local lender can help you optimize the best kind of mortgage, and they work in the community, so there’s accountability.”
Own your numbers. “Most people are going to be approved to borrow more than they feel comfortable with. Work with your lender and your Realtor to reverse-engineer where you need to be shopping and what your maximum monthly payment can be.”
Have cash on hand. “Right now, cash offers are winning; if you have to, you can close with cash [sourced from investments or a family member’s gift], and reserve the right to take out a mortgage later. And be prepared to cover the appraisal gap. Houses are selling above the bank’s appraisal, which means the buyer has to cover the difference. For example, if a house is appraised for $1 million but sells for $1.1 million, the buyer has to have $100,000 in cash to bridge the gap.”
Ovell Robinson
Do your homework. “Interview agents to find a Realtor who has your best interests at heart. Make sure you have an agent willing to work with you for three or six months, or longer. Then interview lenders to get the best rate. Traditional banks can be limited in the products they can offer; a mortgage broker has multiple products available.”
Reduce debt. “Make sure your credit is clean. A broker can often accept a credit rating down to 580, while a bank likely will require 620 or 640. Ask what the minimum is and the debt-to-income ratio required.”
Get creative. “If you don’t have any savings, you may have to wait. But if you have a 401K, an IRA or a family member who will gift you funds, you can come up with the cash to buy. Clients who decided to wait a year and a half ago to purchase homes are now eating crow because inventory is dropping and interest rates are going up. As knowledgeable professionals, we can find a way for you to become a homeowner.”
