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When to Talk to a Lender
Right now.
Talk to a lender very early in the process, even months or years before buying. Doing so can give you a quick picture of your financial situation, as well as anything you need to do (or not do) to ensure you get the best terms when it’s time to buy.
How to Choose
Shop Local
It’s hard to beat a quality agent local to the area you are buying in. They know the area well, including tax rates and insurance costs, which are important when creating an accurate estimate. Local lenders in the Fort Hood area are especially proficient in the VA loan, which makes up a majority of transactions in our area.
More Than a Rate
It is extremely easy for a lender to manipulate the interest rate with things like fees and points. In fact, you can almost ignore rates altogether. Instead, you will want to get a loan estimate (LE) from lenders you are considering. More on that in a moment.
Ask Your Realtor
Another reason to talk to a Realtor first is that they have experience with different lenders and know their weaknesses and strengths. For example, the lenders I recommend are there because they are very knowledgeable about the VA loan and incredibly proactive and efficient when working with clients.
Shopping Lenders
The loan estimate (LE) is the only way to truly compare lenders. An LE is a standardized presentation that breaks out all the fees and rates that a lender charges. On the LE, we might find that one lender is charging a lower interest rate, but higher fees up front.
Getting LEs can also help, as sometimes lenders will be able to match another lender’s terms if you get offered something better. When lenders compete, the buyer wins.
The Preapproval
In order to get an LE, you will have to give lenders permission to run your credit, and essentially go through the basics of the preapproval process.
Once you’ve identified the lender you are moving forward with, you will want to get a preapproval letter within a month of beginning your home search in earnest.
The preapproval letter will accompany your offer.
The preapproval letter is not the final approval for your loan. Often you get it without the lender verifying any of your income. They take your word for it. Once under contract, they then will need documents like pay stubs, bank statements, and tax returns to verify the information and give you final loan approval.
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