The Lending Process: What you May Not Know

     When I embarked on my own home buying adventure, I was already intimately familiar with the real estate process thanks to my profession.  However, I was not as familiar with the lending process.  There are a few things I wish that I had known going into it, and I would like to share those with you.

1. How it Starts
     The process is quite benign to start off with.  You fill out an online application and provide some pretty standard paper work to your lender in order for them to determine how safe of an investment you are.  These documents include W-2s, tax returns, pay stubs, a government  issued ID, and proof of employment. ​In addition to checking your financial credibility via these documents, your lender will also run a credit check on you. 

    All of these factors will play in to how they determine the maximum amount that they can lend to you.  They will then give to you a Prequalification Letter which you and your Realtor can present with every offer you make on a house.

2. During the Process
     After you have had your offer on a property accepted you are "Under Contract."  While you are under contract there are a number of things that you cannot do. This is where the parts start to come in that no one ever told me and I wish they had.  ​
       First, you do not want to spend any amount of money on your credit cards.  Cash is your best friend while you are under contract.  As a teacher on a strict budget, this was hard for me to do.  I rely heavily on my credit cards when times are tight.  Be sure that you have budgeted for this ahead of time.

      Second, you do not want to receive or spend large sums of money.  Your lender wants to know that your financial status is stable and perfectly consistent.  For example, for every real estate commission I received, I had to fill out a letter that stated where those large funds came from and provide proof.  Be warned, your lender WILL run another credit check right before closing and require a second set of statements for your accounts to verify that your financial status has not changed. 

3. Closing Costs
    After you've gone through the entire lending process, having spent absolutely no money for 30-45 days you will have closing costs.  This is the big part that I wish someone had told me prior to budgeting for my home.   I knew that I would have to pay the rest of my down payment, however on average a buyer has to pay an additional $3000-$7000 in lender closing costs according to Zillow.  These numbers will be laid out for you in a Loan Estimate that your lender will give you after going Under Contract on a house, but just be aware prior to the purchase process that these costs exist.

     Though the lending and buying process can be stressful, you have a real estate agent and a lender there to help guide you.  It is their job to alleviate any concerns you have during that time, so don't hesitate to ask.  And, when it is all said and done, you will own your own home!  That is a great reward indeed.