Being a real estate agent means more than just showing clients around homes and hoping they'll like it enough to actually buy it. The most successful real estate agents ensure that they guide their clients through each and every step of the buying process, and that's especially true in the case of first time buyers who might be unsure of how it works.
After all, the more buyers know about the process, the better prepared they'll be. As such, we thought it timely to provide a few tips on how to prepare clients for one of the most worrying parts of the process - obtaining a mortgage.
1. Know your credit score
First up is to find out exactly what your client's credit score is looking like, so they'll know how much they can afford to spend on a home and also the interest they'll likely have to pay on their loan. As such, real estate agents should encourage their clients to check their credit score as early as possible.
2. Work out how much they can borrow
It should be possible to work out roughly how much your client can borrow. Lenders generally don’t like to see a monthly housing payment that's over 28 percent of a person's pre-tax income. The percentage threshold often cited for total debt - which includes the mortgage payment - is then no more than 36 percent. Some lenders will offer differing percentages but these are the most commonly used.
3. Prepare all the documents
These include documents showing how much income they earn, their employment status, identity documents, tax returns, bank statements and more. Agents should encourage their clients to get all of these things ready in advance so they can provide them to the lender as soon as possible and speed up the application process.
4. Get pre-approval
Pre-approval can often give your clients an edge should others be interested in the same property, as sellers can be sure they're not wasting time considering your offer or negotiating with you.
5. Calculate the closing costs
The closing costs typically add up to two-to-three percent of the mortgage principal amount. Buyers need to understand that these costs must be factored into their calculations to avoid any nasty surprises.
6. Shop around
As an agent it's your job to encourage your clients to shop around for multiple quotes from different lenders. Shopping around could well save them thousands of dollars.
Monthly housing payments acceptable in CA is 38 to 43 percent of a buyer's pre-tax income for their housing payment. 28/36 ratios went away in the 80's.