The headlines of a decade ago told the depressing tale: a rash of foreclosures, abandoned homes across the nation and the crash of the mortgage industry. One reason for that was lenders offering riskier and riskier loans to more and more borrowers, then the bottom falling out.
“Everything goes in cycles. It was the wild, wild West for a while,” explained Michael Lappin, co-owner and mortgage loan originator at Buckhead-based Stellar Mortgage Corporation. “It used to be very strict, and over time that eased. There’s a role in the government encouraging people to be homeowners, so they back a lot of these mortgages and they ease a lot of the requirements so that more people can get into a home. Then the market began to get too loose around 2007 or 2008.”
Lappin said home loan requirements became too restrictive in the years that followed, but that things have leveled out and found a sensible middle ground.
“We can do a lot of loans now. We have tremendous flexibility,” he said, adding that it’s not a problem if a first-time homebuyer doesn’t have 20 percent of the loan to put down, or if they are self-employed. “It’s all normal stuff that we do.”
First-time homebuyers or repeat homebuyers who haven’t gone through in the process in awhile might be nervous or unsure of the process, but it’s not as complicated as it seems.
Getting qualified and shopping for properties
“The first thing that people should do is really understand their own budget,” Lappin said.
How much do you make? How much do you spend and where do you spend it? What kind of monthly payment are you comfortable paying (making sure to include not only the mortgage payment but association fees if buying a condo, taxes and insurance).
The next step is finding a loan officer or loan originator and having a conversation about your goals, timeline and your overall financial picture so that they can figure out the right loan program to put you in. After that, it’s time to fill out an application.
“That’s really our roadmap to fully understanding their financial position,” Lappin said. “Once we do that, we can get a credit report, because a lot of rates are credit-sensitive, and then we can really start to get some very specific numbers put together for somebody. That way they are shopping in the right price range for a home.”
After getting qualified, that’s when it’s time for what most consider the fun part – shopping for a home. That’s a good time to make sure your loan officer and real estate agent are on the same page.
“I like to work with the agent in a collaborative way so if I don’t know their agent already, I always ask for an introduction,” Lappin said. “Then we have a conversation about how we want to approach the offer. Today’s market is pretty competitive, so every seller is looking for a pre-approval letter for people making an offer. We have to work together to put all that together so it’s a strong, accurate offer for the client.”
Once an offer is agreed upon and the home is under contract, the mortgage process begins.
‘It should not be a stressful process’
The mortgage process involves a lot of paperwork, but luckily it became automated over the years.
“Most of it is electronic and it’s pretty streamlined,” Lappin said.
The loan officer collects all of the paperwork and submits it to an underwriter, who reviews the documentation to make sure nothing is missing. Once the underwriter approves, it’s time to order an appraisal on the new home. If everything checks out, a closing day and time is scheduled with a closing attorney. But what about potential issues at the closing table?
“Because of communication throughout, there shouldn’t be any surprises,” Lappin said. “By the time we get there, we should have the disclosures and they should match back to the original estimate.”
A real estate closing typically takes about an hour, where all parties review the numbers one last time before signing on the dotted line, making sure everything is correct, then the borrower getting the keys to their new home.
“It should not be a stressful process,” Lappin said. “When it’s done right and the communication is there, people get to the closing table and it’s just a nice time to meet the sellers, talk about the neighbors, find out what day trash day is, if you’re in a condo find out if you need to walk your dog in a certain place. It’s really about information sharing and signing some paperwork.”
And what about those who aren’t ready to buy yet, but want to in the next couple of years?
“The most important thing is to pay all of your bills on time and to make sure you pay all of your income taxes, and to declare your proper income,” Lappin said. “Get your financial house in order. Save money for a down payment, make sure that you pay everything on time, document what you’re doing and keep good records.”