By Mark Lemmons I April 20, 2022
There’s an old adage in real estate: “Buyers are liars.” This is usually said in jest by mortgage lenders and real estate agents. We’ve seen too many home loans fall through because of something that a buyer didn’t disclose!
This begs the question: what personal information do you need to share in order to purchase a home? If you are working with a good real estate agent and lender, they will ask the questions to uncover necessary information. But, it’s helpful as a buyer to understand what kind of information needs to be offered up. And if your lender or agent isn’t asking these questions, it’s a big red flag.
As a homebuyer, you want to position yourself for a successful purchase and enjoy a smooth transaction. Here are the 8 things that every buyer should tell their real estate agent to avoid some of the common pitfalls of the buying process.
Be ready to share about your employment status and history. As you probably know, mortgage companies will want to see a solid income history, and that may look different depending on whether you are a W2 employee or a 1099 contractor. Freelancing and side hustles are also becoming more and more common in our post-COVID world. Be sure to let your agent know right away what your employment status is, including any and side income.
Speaking of income, you want to be completely honest about this factor. Your lender is going to have to get documentation for pay stubs and bank statements, so there’s no reason to hide anything on the front end. If you’re a 1099 contractor, your length of time earning a certain amount of consistent income is going to matter more than if you are a W2 employee, so be sure to discuss this with your agent as well.
Another area you want to be transparent about is any debt you have. I understand this can be a tough subject. Sometimes, we make foolish decisions that we pay for – literally – for years. Other times, we encounter really tough situations that cause us to take on debt. And, of course, there is debt that we knowingly and strategically took on to accomplish a bigger goal. Whatever your situation is, you’ll want to fully disclose this information. Again, lenders are going to do their due diligence, so the details are going to come out.
Oftentimes, wrong numbers regarding debt isn’t a result of buyers trying to hide things, but simply a result of not knowing the facts. Autopayments make it easier and easier for people to not really know debt balances. But, it’s best to check and be accurate up front. This will allow you to have a good plan from the beginning and avoid having to reroute midway through.
Your savings and assets can help you get better financing. Your financial assets may include…
Any assets you have gives lenders more security loaning you money, so this is another important area to discuss with your real estate agent.
You’ll want to share your plan for a down payment and how much you have saved for it. This is important because it will affect your financing and rates. But it also matters where your down payment is coming from. Most buyers have money saved up for a down payment, but it is possible to get the funds for a down payment elsewhere. Financial gifts from family, financial windfalls from a family inheritance, or a bank loan could also be used. Whatever your plan is, be sure to communicate about it. It matters for structuring your loan and can delay closing if this isn’t done correctly.
Of course, the most common thing people think of when it comes to applying for a home loan is credit standing. Your credit score plays a huge role in your financeability and interest rate. You want to be up front about any lines of credit you have, including any small lines of credit you may have opened at your favorite retail store to get that irresistible discount. Your financing undergoes great scrutiny throughout underwriting, so any credit information is going to eventually come to the surface. It’s always best to be up front and think back to any open lines of credit you may have forgotten about. The less surprises, the more smooth and pleasant the process.
Many home buyers purchase homes in order to make it their primary place of residence, but some may purchase a home as an investment property or even a vacation home. You’ll want to tell your real estate agent and lender the intended purpose for your property. There are laws and regulations around the type of lending available depending on your purpose for the home.
Finally, be sure to communicate any potential changes in your financial situation. For example, if you are considering purchasing a car in the near future, you need to tell your real estate agent. You also want to communicate any potential job changes or things like co-signing a loan on behalf of someone else. Any of these changes in your finances could disrupt your home loan and you want to be sure to discuss it first.
In many ways, your home purchase will be as smooth or difficult as your transparency with your lender and agent on the 8 items we reviewed. Of course, other factors like the market’s climate, appraisal process, and home inspection will play a huge role as well. But your handle on the factors above and willingness to communicate about them is key for a successful home purchase!
If you’re looking to purchase a home, please contact me. I have a lot of experience helping buyers apply for a loan and get into the home of their dreams.
Want to learn more about the buying process?
Letter of the HeartMarch 2019 It’s been too long since we’ve talked, and I hope you are well! If we haven’t spoken …
Letter of the HeartJuly 2019 It’s been too long since we’ve talked, and I hope you are well! If we haven’t spoken …