Written by Tom Tomasian
The month of April brings many special events: the official start of Red Sox baseball, the running of the Boston Marathon and the beginning of the spring housing market. While I can’t swing a bat to save my life, as a four-time Boston Marathon finisher and a loan officer I do know a few things about running 26.2 miles and closing loans. And, believe it or not, buying a home and finishing a marathon have a lot in common.
The Boston market is currently red hot, and many new buyers are just missing out on their dream home. Some are getting outbid; others can’t secure the financing they need to make their dream home a reality. With the current lack of inventory and surging home prices, buyers need to be prepared when they enter the market.
Buying a new home is not a sprint. While the crazy pace of the market may make you want to dash through the process, new buyers should still be doing their due diligence before making the biggest purchase of their life. Like running a marathon, buying a home requires careful planning and is not a process that should be rushed. The more mentally and financially prepared you are, the easier and more enjoyable this journey will be.
Before you start browsing online or reaching out to realtors, you should get pre-approved by a trusted and experienced lender.. Don’t be fooled by ads that claim to pre-qualify you with one touch of a button. Be wary of any lender that offers you a Pre-approval Letter without seeing any of your financial documents. While technology does make the mortgage process a little easier, it should not take the place of human interaction. When I preapprove a borrower, I collect all the necessary documentation up front so you can shop with confidence knowing that your income and assets have been verified by the lender. With a valid Pre-approval Letter, you will gain credibility with the seller and be taken more seriously when submitting your offer.
The first question that many buyers ask me is how much they can borrow. The affordability factor is something I like to look at with my clients from the beginning. Finding a comfortable monthly payment should be your first priority. You may qualify for a certain monthly payment on paper, but that doesn’t necessarily mean you want to pay that much every month. Live within your means. As lenders, we qualify you on your gross monthly income. Your net monthly income after taxes is what you really should be focusing on. To keep your monthly payment at a number that is comfortable for you, you may need to put a bigger down payment down or may choose a different program. Much like following a training plan for a marathon, creating a home buying budget and sticking to it will help you avoid future pain. I like to sit down with my borrowers before they start looking at homes and do a full analysis so they understand all their options. Although your home will probably be the single biggest purchase of your life, don’t let bumps in the road stress you out. Very few people have their offer accepted on the first try. Don’t get discouraged. Be patient and try to enjoy the quest.
The weather this Marathon Monday hit almost 75 degrees, much warmer than anyone trained in. Throughout the route I saw people cramping up on the sidelines, walking, crying—but most of them worked through the pain and setbacks to finish the race. When something unforeseen happens, either during a marathon or while buying a home, you need to adjust and carry on. There usually are some bumps along the way. Some issues may pop up that will be out of your control. This is why it is important to have an experienced loan officer on your side: we deal with it, and we carry on. Remember, this is not a sprint to the finish–slow and steady will win the race.
Once you do find your dream home and your offer is accepted, the actual loan process will begin. You will sign an Offer to Purchase then you will typically have 10 days to sign the Purchase and Sales (P&S) contract. During these ten days, you will obtain a home inspection to ensure you are comfortable moving forward. On your P&S, there will be two key dates: the mortgage contingency date or the ‘Commitment’ date and the ‘Closing’ date.
The Commitment date is the date in which loan has to be approved by the bank. The realtor, buyer, and lender should all be on the same page and agree on this date before the contract is signed. Most realtors want a Commitment Letter that is clean, meaning without any outstanding conditions that could hinder the closing of this loan. This is the biggest source of stress for most new home buyers, but it doesn’t have to be. Your lender should work with you to ensure all borrower requirements are cleared by this date.
If you are searching locally, you should keep in mind that the South Boston condo market is a different animal. Many homebuyers in this market will need JUMBO loans, which take more time to underwrite and close. This needs to be factored in before you sign your P&S.Talk to your lender and sure you understand the timeline from the beginning, and you will have much easier time with the loan process.
The second important date is the Closing. Once you have your Commitment Letter, you have essentially conquered Heartbreak Hill and the rest of this marathon should be smooth sailing. If the loan process was done efficiently, then you will soon have your Clear to Close (CTC) from the bank. These magic letters C-T-C mean that there is nothing left for you to do but cross that finish line. After completing my 4th Boston Marathon this week, I can tell you there is no better feeling than the exhilaration that comes with finishing, and I am sure you will feel the same way once you close on your new home.
I’d love to help you start the pre-approval process today or answer any questions you have about buying a new home. You can call or text me at 617-866-9900,and you can also email me at [email protected]. I look forward to helping you.
*A pre-qualification is not an approval of credit and does not signify that underwriting requirements have been met. Copyright©2017 Fairway Independent Mortgage Corporation. NMLS#2289. 4801 S. Biltmore Lane, Madison, WI 53718, 1-877-699-0353. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. MA Mortgage Broker and Lender License #MC2289. MA Loan Originator License #49810.