Engle Realty: Louisiana Real Estate
Residential & Commercial Real Estate Sales and Rentals
What does the bank do when buying a home?
The Bank is the first stop when buying a home if the buyer is not paying cash for a home. Your Engle Realty real estate agent can help you in this part of the transaction to make it easier. At the bank a buyer can find out how much they can afford. If the buyer doesn't have a loan officer already, it is a good idea for the buyer to ask their Engle Realty agent for a reputable loan officer who can help them obtain a real estate loan. The buyer's real estate agent can be a great resource for finding reputable service providers for obtaining a loan, as well as several other service providers that the buyer will need along the way. A buyer's real estate agent works with loan officers all the time, and anytime real estate agents come across a loan officer whose service is exceptional they usually keep their contact information to give to their buyer clients who are looking for a loan officer. Another alternative is for the buyer to go to the bank where the buyer currently have a checking or saving accounts. This could be a local credit union or a bank such as Whitney Bank, Chase Bank, Regions Bank, Teche Federal Credit Union, Red River Bank, Campus Federal, Neighbors Federal Credit Union etc. Since the buyer already has a pre-established banking relationship with such bank the buyer can use it as a springboard to help secure a home loan.
The bank, loan brokers, loan officers, loan originators, mortgage originators, and mortgage brokers are all terms used to mean the same thing. What do all these terms mean? While their meanings differ slightly, these terms are all used to mean the person who works on behalf of the home buyer in preparing the paperwork needed to apply for a loan and then works with the bank on having the bank approve the buyer for such loan. This point of contact for the financing institution will consult with the home buyer to help determine the best loan product for the buyer's finanacial situation.
Regardless of where a buyer goes to get a loan, they should go to a "Loan Officer" and tell the loan officer that they are buying a home and that they want to see how much they can afford. The loan officer will then ask the buyer for information and documents. The loan officer will likely request request the buyer's most recent tax returns, most recent bank statements, and most recent pay stubs from their employer.
Real Estate Banking Tip:
Banks generally like to see that a buyer has worked somewhere for two
years. If the home buyer has just graduated from college and started working for
a company that is in the same field of their field of study then the
number of years you were in school for that field of study could be
applied as equivalent. For example, say a buyer went to Louisiana State
University's Vet School for four years. Upon graduating, the buyer went
directly to work for a Veterinarian. After 6 months of working for the
Vetrinarian, the buyer decides to apply for a home loan. The loan
officer could use their education term to qualify for the two year work
history requirement that the bank normally requires.
The loan officer will get all of this information together, verify it, and then assess it. From the assessment they will find out how much the buyer can afford. Afterwards, the buyer can get a pre-approval letter stating that "So-and-so is pre-approved for such-and-such amount of dollars". The buyer can then take this letter to their Engle Realty agent, and whenever the buyer makes an offer on a house, the Engle Realty agent can use this to better the buyer's position, and make the buyer's offer more appealing to the seller.
Real Estate Banking Tip: Pre-qualification and pre-approval are not interchangeable. Pre-qualification is more like an "educated guess" with no documents provided to the loan officer. This process can be done over the phone in a short amount of time. Pre-approved is where the loan officer has verified your information and the buyer has been pre-approved for the loan. Documents have been submitted and the buyer may have signed some papers. Whereas pre-qualifying someone can take a few minutes, it can take as long as one to several days for someone to be pre-approved.
Any experienced real estate agent would highly recommend all clients who are financing their houses or condos to get pre-approved prior to viewing properties.
Just as a builder wouldn't go to build a house without first laying the foundation, a buyer shouldn't go to buy a house without first obtaining a pre-approval. Financing is the foundation of the real estate transaction.
Problems associated with home buying when not getting pre-approved to purchase up to a certain amount often arise.
One example is when a buyer, Buyer A, sees a high demand property. Buyer A submits their offer with no pre-approval. An hour later another buyer, Buyer B, submits their offer. Buyer B's offer does include a pre-approval letter. The seller will likely choose the pre-approved buyer, Buyer B, over Buyer A.
Another example is when a buyer, Buyer C sees a house they want. Buyer C submits an offer without a pre-approval. Buyer C's offer is accepted. Thirty days down the road Buyer C still cannot receive financing. On day 31, the bank tells Buyer C that Buyer C's debt-to-income-ratio is too high. In other words, Buyer C cannot afford this home. Buyer C then cancels the contract, loses the money it cost to inspect and appraise the house. The seller has to put the house back on the market. The deposit is generally returned in this circumstance, but nobody wins. This is an unfortunate circumstance. Sometimes these circumstances cannot be avoided. But buyers having a skilled real estate agent to represent them can often avoid such circumstances, as the real estate agent can generally ascertain whether a buyer client can afford a certain house or not by the buyer conveying to the agent their financial status. Engle Realty real estate agents always encourage Engle Realty buyers to get pre-approved prior to searching for homes.
From a seller's standpoint, a good sellers agent will require all offers to include the buyer's pre-approval. This small detail, can often save the seller from not only taking their house off the market, but the lost rent or payments on a house that it acrues while it stands off the market for a month or two waiting on financing from a buyer who can't get a loan.
These are two reasons why it is important to get pre-approved first. Without doing so can lead to many problems, including a loss of time and money for all parties involved.
One advantage of using Engle Realty agents is that they can help connect you to local experienced real estate mortgage officers and brokers who can help you in obtaining a loan. Using local mortgage officers will greatly increase your success in purchasing a home when competing buyers are submitting their offers against yours.