By Chad Taylor
I have had so much fun with the buyer and seller interviews I recently shared with you that I decided to chat with one of our area’s top loan officers, Jim Yarrington with People’s Bank. He is a great partner of ours and I have total trust in him. I asked Jim to answer a few commonly asked questions we receive from our clients. He was happy to do so. My hope is that this will help any potential buyers out there to get a head start when it comes to your financing.
Chad: How would you describe the lending world today in ten words or less?
Jim: Flexible, but very detailed.
Chad: How so?
Jim: If I have someone with a couple years of work experience, a down payment, and relatively good credit, I should be able to get them a home loan. There are a variety of options these days. It is not as hard as the media makes it out to be. As a result of the loan fallouts from 2003 to 2007, however, the national investors (backing the home loans) are looking for extremely detailed information and insight into a buyer’s finances.
Chad: What has been the biggest change in the home loan process in the last couple of years?
Jim: The amount of detailed paperwork requested of the potential buyer by the investor backing the loan.
Chad: What is one of the biggest challenges for most potential home buyers these days?
Jim: For them, they need to understand the difference between being pre-qualified and pre-approved.
Chad: What is the difference between a pre-qualification and a pre-approval for a home loan?
Jim: Sadly, in my industry the terms are often used interchangeably. A pre-qualification is more of an opinion based on a short interview process. Whereas a pre-approval is a credit driven, fully documented review of the information that is on the loan application. To compete in today’s market as a buyer, certainly a pre-approval places you in a stronger position.
Chad: Can you give me three “best practices” or suggestions for someone who is preparing to enter the market?
Jim: Sure. First, make a budget. What is your mortgage payment comfort level now? In the next five years? Budget is a big one.
Two, consult with a referred (and experienced) mortgage loan officer early. Don’t assume that you can or cannot get pre-approved. Again, the market is flexible.
And three, get organized. Collect and organize pay stubs, tax returns, employment letters, bank statements, and any other documents that may fully explain your financial situation.
Chad: What is a common misconception when it comes to home loans? Better yet, what is the truth?
Jim: You do not have to put 20 percent down to purchase a home in today’s market. For example, for a home in the Prairie Village market, there are loans for as little as 0 percent down (VA loan or a gift down payment on a conventional loan). The most common down payments are 3.5 percent of the sales price on an FHA loan and 5 percent on a conventional loan.
Chad: How long does it take to get pre-approved? How long does it last?
Jim: If you apply online today and I supply you with a list of documents that I need in return, and you submit them tomorrow, I can have a pre-approval the following business day (barring any surprises). Most pre-approvals are good for 90-150 days.
Chad: What should we have discussed that we did not?
Jim: Bankruptcies, short sales and foreclosures. People often ask ho long you have to wait after a bankruptcy to purchase a home. The answer is two years after the date of discharge. Typically the waiting period after a foreclosure or short sale is three years. There are some exceptions, however. Again, you should talk to an experienced loan officer because each situation is different.
I want to thank Jim for his professional time and his insight. If you would like to share a question with Jim, his email is [email protected] or you can call him directly at 913-239-2922.
I agree with Jim. The media has painted a negative picture of the lending environment today. Outside of the low interest rates, our media really doesn’t have a lot of nice things to say about the lending world. That is a shame.
I must say that the downturn of the market did an excellent job of “purifying” the lending system. As with most market shifts, those who are left (loan officers) and still thriving after a huge downturn are the ones who were probably doing it right all along. Lenders like Jim and many of his colleagues have always put their clients’ needs first. That is the kind of lender you need to find.
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This weekly sponsored column is written by Chad Taylor of the Taylor-Made Team and Keller Williams Realty Key Partners, LLC. The Taylor-Made Team consistently performs in the top 3 percent of Realtors in the Heartland MLS. Please submit follow-up questions in the comments section or via email. You can find out more about the Taylor-Made Team on its website. And always feel free to call at 913-825-7540.