If you’re in the market for a new home and you plan on gaining financing, then chances are you have already talked with a lender. Maybe even before you’ve contacted a real estate professional you have obtained a handy little note saying you are approved for financing. And in the event that you find a new home can immediately put down an offer.
Sounds great. For buying the process couldn’t be more simple, but what if you’re on the selling end of the transaction. Should you talk with a lender before putting out that FOR SALE sign?
Here is the situation. Almost 70% of Americans have a mortgage. You plan on selling your home, whether to downsize, upsize, job transfer, whatever the reason. Your goal could be to buy a new home while closing proceedings are happening with your old home.
Sounds pretty straight forward. You’re really just transferring one loan for another. It should be no big deal.
Or that’s what you think.
The reality is that it is a very big deal and every seller with a current mortgage should consult a lender. The reasoning is that you can pay on your current monthly mortgage but still have bad credit, or still be swamped with bills or have employment problems.
When the time comes to close on your old home, the last thing you want is to find out that you don’t qualify for a new loan. That dream home you were hoping to get could turn into a rental where you have to stay until your situation improves.
This is a sad situation, but it happens to a lot of people. Don’t let it happen to you!
So the big question is: when should you talk with a lender? You can do it one of two times:
1. Before you talk with a real estate agent. That way you know before you get the selling-ball rolling. If it takes credit repair or more down payment you can start working on those things before moving the process forward.
2. After an introductory meeting with a real estate professional. They can give you an estimate on what the market value of your home is worth or for how much it’s likely to sell. That could be very useful information for lender.
The important thing is to be prepared. Don’t wait until the last minute to talk with a mortgage company. Even if you are selling and planning on buying, it is one of the first steps you need to take.