Many people put off meeting with a lender because they don’t understand what the meeting is really for. It is NOT about the lender learning if you can qualify or not; the lender can usually determine that with some very basic information and a credit report. The real purpose of the appointment is for you to learn about what options you have, and how the process will work. The three things listed below are by no means the only things you will get out of the meeting, they are the basic things most people want to know.
1. How much is this going to cost? There are two basic costs: the down payment and the closing costs. While the down payment is pretty simple (assuming you are not using a 0-down payment loan,) the closing costs are not as straight forward. A typical real estate purchase involves up to 30 different transactions with a variety of costs and which can be paid for by the seller, the buyer, or even the lender. Your lender should explain these costs, and go over the options regarding how they will be paid.
2. What will my housing expense be? This one may seem simple, but there are many components to housing costs, and also some options as to how they can be paid. The basic loan payment (usually called the Principle and Interest) is only part of the picture. There is also homeowners insurance and real estate taxes that need to be paid which are usually included in the payment, but can be paid directly depending on the down payment and loan program. Next there is the mortgage insurance cost (unless the down payment is over 20%,) and that can be paid several different ways. You should also know about other potential costs depending on the property. Some of these are: Home Owner’s association fees, Mello-Roos assessments, flood insurance, earthquake insurance, bond payments, etc.
3. What things do I need my Realtor to know? While your Realtor and lender should be in communication about these issues, it’s also important for you to know them as well so that you can work better with your Realtor. Do you need the seller to pay closing costs? Are you using a loan program that will take extra time? Are there any property restrictions including condition, location, etc.?
A successful meeting should make you feel comfortable with the process, costs and help you understand the process. One of the most frustrating things I find in my business is that people are often doing things that they don’t need to do, or have done things that actually hurt their ability to buy. So don’t put it off!