Bay Area Real Estate Experience
ALL ABOUT FINANCING
Financing Your Home Purchase
One thing to know about buying property is that there are many lender resources and loan products to choose from. As a Buyer, it's easy to get overwhelmed with your options and not know where to even begin the pre-approval process. Here's a few tips: the type of lender you choose can be either a mortgage broker, who has access to multiple loan packages via different banks, or a direct lender who works specifically with one particular financial institution. There are pros and cons of both of these types of mortgage consultants:
MORTGAGE BROKER - PROS: may be able to place a borrower with a lender that more directly matches the borrower's needs (such as a self-employed, handling of assets, credit challenged, downpayment assistance program, etc)
MORTGAGE BROKER - CONS: they may not have as much influence on how that file is handled once it reaches the underwriting stage as they are more of a 'middle-man'
DIRECT LENDER - PROS: is employed by that specific bank and knows the intricacies of their bank's lending process and may have a more direct line of communication with the underwriting department when it comes to handling issues & meeting of deadlines
DIRECT LENDER - CONS: must adhere to their bank's underwriting guidelines; less flexible when it comes to special borrower scenarios
What is the difference between a pre-qualification and a pre-approval?
It is always in your best interest to consult with a mortgage advisor BEFORE you begin your home buying journey as it will save you time and effort. It is true that most Buyers will maybe start by checking on-line lenders, which can be helpful in determining a ball-park budget; and you may even be tempted to move forward with a lender who gives you a basic pre-qualification letter. However you are not fully approved until your lender has verified information such as your credit, your assets, your proof of employment, etc. Having completed this process upfront will save a lot of time and get you better prepared to enter into a solid purchase contract. Whenever possible, we encourage our Buyer clients to work with a LOCAL, experienced lender resource. We have a list of recommended lenders that we've worked with over the past two decades, and we strive to match our Buyer clients up with the best lender that meets their needs, whether it's a mortgage broker or direct lender scenario. Ask us for our list of recommended mortgage consultants, we're happy to share our resources.
We Work With Multiple Top-Rated Mortgage Consultants
A SUCCESSFUL HOMEBUYER TEAM LOOKS LIKE THIS: YOU, YOUR AGENT AND A GREAT LOCAL LENDER.
Many home buyers don't realize how closely their agent and their lender must work together to successfully close a deal. Some of the ways we work together include:
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Initial Introduction
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Vetting of property: does it meet underwriting guidelines?
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Budget & payment advice
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Collaboration on contingency timelines for appraisal, full approval and close of escrow
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Communication with the title company
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Keeping the timeline on track
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Handling of closing documents
Cash Offer Resources
Oftentimes Buyers find it difficult to 'compete' in our challenging and fast-paced Bay Area real estate market, especially when they find themselves up against other Buyers who have the financial ability to waive the financing contingency and close transactions faster. One way to combat this competition is to become a cash buyer yourself...but how do you do this when you don't actually have the cash funds???
Answer: You can align yourself with a company that provides the cash funds for you! Yes, there are companies that will take a look at your buying scenario and 'front' you the funds to make a cash offer. You purchase the house using their money and then after you close the transaction, you refinance to pay back their advance. It's actually pretty simple - but it's not free. These companies have fees that they impose in order for you to 'use' their cash funds. Fees may vary, depending on which resource you use, as well as other things like the amount of money you need, or whether or not you refinance using their in-house lender, etc.
Here's a quick case study involving a past Buyer client who we helped last year: Having sold their house in another state, they were relocating to the Bay Area to start a new job. They experienced 'sticker shock' when it came to finding a home that fit within their budget and weren't ready for the level of competition that they encountered. After a few months of making solid offers only to get beat out by Cash Buyers, they became a lot more stressed out because their deadline to begin their new job was looming closer and closer. We took an honest look at our progress and discussed how they could increase their chances. They decided to work with one of our local 'Cash Offer' providers. It was great timing because that week, we had actually found another perfect house for them; we made a cash offer that had a fast close, and they got the deal! After months of shopping and making unsuccessful offers, they were finally able to move out of their short-term (and expensive) rental. The cash offer company that they chose to work with had a fee structure that charged them 1% of their final loan amount...which was less than what their short-term rental had cost them for multiple months. Plus, they were able to purchase their new house for less money because they didn't feel like they had to overbid as high as they had been when they were a financed Buyer. An easier way to explain this is that to compete as a Buyer who is getting a loan, they were often offering 10-20% over the asking price; but as a Cash Buyer with a faster close, they became more desirable to the Seller and their chances of 'winning' the multiple offer scenario increased. The fee that they paid to 'use' the cash funds was less than what they would have had to overbid to get the deal, and it happened much faster.
Bay Area Local Real Estate affiliates with multiple cash-buyer lenders and we are happy to share our resources with you and discuss the pros/cons of using these type of programs.