How to Get the Best Mortgage for Your Situation – Week 1: What to Say When You Contact a Lender

Welcome to Week 1 of this series, where we’ll explore how to find the best mortgage that aligns with your financial situation and goals. This week, we’re diving into a critical step for both first-time buyers and move-up buyers alike: What to Say When You Contact a Lender. Many people think the first question to ask is, “How much can I be approved for?” But in reality, there’s a much better approach.

Most buyers get approved for more than they truly want to spend. This article will teach you exactly what to say when you contact a lender to make sure you’re getting a mortgage that fits your needs—starting with a budget that matches your monthly comfort zone, not just the highest amount possible.

Step 1: Shop Around and Prepare to Ask Questions

It’s crucial to contact more than one lender to explore the mortgage opportunities available to you. By discussing options with two or three lenders (not just searching online), you’ll learn about different mortgage programs and potential benefits. If you’re unsure where to start, I can recommend a few reputable lenders. Reaching out is your chance to begin asking what to say when you contact a lender—a strategic first step.

Step 2: Gather Essential Documents but Focus on Your Monthly Budget

You’ll need to gather pay stubs, bank account statements, W-2s, tax returns, and information on existing debts. But just as important as these documents is being clear on what to say when you contact a lender. Your first discussion with a lender should focus on your target monthly payment, not the total loan amount. This approach steers you toward a mortgage that fits comfortably within your budget.

Step 3: Explain Your Desired Monthly Payment Range, Not Just Purchase Price

Many people think they want to spend a specific amount on their new home, like $500,000, just because they’ve been approved for it. However, it’s crucial to make sure that the monthly payments on that amount align with your budget. When you approach a lender, what to say when you contact a lender should center around monthly payments first. By reverse-engineering from your preferred monthly payment, you’ll identify the home price range that works best for you and avoid homes that may strain your budget over time.

Backward is Better

When you’re figuring out what to say when you contact a lender, start by telling them your preferred monthly payment range. Ask them to calculate the home price range based on that number rather than focusing on the total purchase price. For example, if you’re comfortable with a monthly payment of $3,000, the lender can work backward to show you the maximum home price that meets that monthly target, accounting for interest rates, property taxes, and insurance. This strategy is ideal for both first-time buyers and those looking to move up, as it keeps affordability at the forefront.

Know the Difference: Same Price, Different Monthly Payments

One important reason what to say when you contact a lender should focus on monthly payments is because of the variance in costs among different types of properties. For instance, a $500,000 condo with HOA fees may have a very different monthly cost compared to a $500,000 single-family home. Talking to your lender about monthly payments instead of a single home price can help you avoid surprises in your budget down the road.

What To Ask A Lender If You Are Buying And Selling At The Same Time!

For buyers who are also selling their current home, it’s crucial to discuss the timing of the sale and purchase with their lender. Specifically, they should understand whether they’ll need to sell their current home before qualifying for a mortgage on the new one. This can be important if they’re depending on the sale proceeds for a down payment or if carrying two mortgages would impact their debt-to-income ratio, which is a key factor in mortgage approval.

Here are some questions they might ask:

1. Contingency Options: Ask the lender about options for contingent offers, where the purchase of the new home depends on selling the current one. Some lenders have specific programs to help bridge this gap.
2. Bridge Loans or HELOCs: For those needing funds from the current home sale for a down payment, ask the lender about bridge loans or Home Equity Lines of Credit (HELOCs) that can provide temporary financing until the home sells.
3. Simultaneous Closings: Buyers should discuss the feasibility of closing on both homes around the same time to reduce the need for temporary housing or short-term financing.

Understanding these factors can help streamline the process, reduce financial stress, and ensure the timing aligns with their overall goals.

This first article in the series aims to set you on a path to mortgage success. We’ll continue next week with “How Much Do I Need for a Down Payment?” But for now, remember, when you’re ready to make that call, take a few minutes to review what to say when you contact a lender. Let me know if you have any questions, whether you’re buying for the first time or planning to sell and move up!

JDanielRealestate.com