(Editors disclaimer: This is a guest post from a paid sponsor of #LifeofaMedStudent and thus has a financial relationship with the website.)
Six Steps to a Flawless Home Purchase
In the post-mortgage meltdown world of mortgage lending, physicians face more challenges and have a higher rate of underwriter decline than any other professional client we work with. It’s shocking but true. Spend a few minutes in physician chat rooms where the topic is mortgage and you will read nightmare after nightmare horror stories. It’s truly scary what a batched home loan and closing can do to a family.
The unfortunate reality is mortgage has become one of the most highly regulated and highly scrutinized industries in the country. The Dodd Frank Act added an immense amount of regulatory disclosure as well as provisions such as the “Ability to Repay Rule”, which legally require a mortgage lender to PROVE you have the ability to repay your loan, or the lender could be fined up to 10 years of mortgage payments. Think about that for a moment — if we make a mistake in how we calculate your income, or we allow you to close on an employment contract without all contingencies being removed, we could be found responsible to pay your mortgage for the next 10 years. That is a lot of dough, and it should give you some insight as to why qualifying for a loan has become more difficult and less enjoyable from a client experience perspective.
So what can you do? You can educate yourself, you can be more prepared, and more aware than your peers. If you follow these Six Steps to a Flawless Home Purchase, you’re virtually guaranteed to come out the other side unscathed.
Choose a Mortgage Professional Who Can Educate and Truly Guide You
If you just do one thing right, find a professional experienced with doctors and dentists. You’ve got to do your due diligence by researching and interviewing the professional. Make sure the mortgage professional has experience with physicians and has done a good job with physician clients in the past.
If you spend extra time and energy to find the right person and then allow that professional to guide you through the process, you’re much more likely to get to closing without a hitch. Physicians often run into trouble when they think that there is no reason that they shouldn’t get financing. For instance, the resident who was able to get a home loan back in 2006, before the mortgage meltdown, who is now making significantly money, may think that getting a home loan today should be easy and any bank would finance them. However, the physician may not be taking into consideration all of the factors, like his new position being a 1099 independent contractor or wanting to close on the new home prior to starting the new position. Both of which would through a huge wrench in things for a conventional mortgage lender.
The reality is that a lot has changed and under the lens of the post-mortgage meltdown underwriting guidelines, getting a loan is not as easy as it used to be. If there’s a deficiency with your situation, you need an expert to guide you through the loan process and all possible solutions. Nobody is better able to do this than someone who specializes in physician home loans; they’ve seen all the same challenges before and have an arsenal of outside of the box solutions.
Verify Your Lender’s Reputation
Once you think you’ve identified a good loan officer, verify his or her reputation. Look for past client testimonials and don’t be afraid to ask how many doctors they have worked with in the past few months and how many they are working with currently. If you don’t get a good vibe or you’re not sure, I’d advise you to keep looking or even ask to speak with past physician clients.
Once you’ve identified several loan officers in your area who appear to be experts, who have testimonials and who look like they serve physicians on a regular basis. It’s really important to have a good phone conversation with them. Take a few minutes to cut out all distractions, don’t call from the freeway or emergency room (I’ve literally had a call from an anesthesiologist in the middle of a procedure). Find a place and time you can be focused on the mortgage professional you are interviewing, let them know any challenges that you can see, such as student loans, relocation to a new state and or job, source of down payment and ask them a couple of intelligent questions. You will know in your gut whether the mortgage professional is the real deal.
3. Obtain a Credit and Income Approval
A Pre-Approval is simply not enough for you to gamble your family’s new home on. You must get a full Credit and Income Approval. The importance of getting all credit and income documents into the hands of an underwriter as early in the process as possible cannot be overstated.
The thing to keep in mind is that the underwriter is the one who has the final say. Finding a seasoned loan officer who is experienced with doctors is a great first step, but at the end of the day, it doesn’t matter how good your loan officer thinks your file is because he or she is not the final decision maker. It’s not like a mom and dad situation where the underwriter and loan officer meet in the middle. It’s like a kid and parent situation and the parent in this situation is the underwriter. That’s where the buck stops. Get all of your income, new employment contracts, student loan changes and down payment documents all the way to the underwriter and insist on a full Credit and Income Approval. Once you have that, you’re ready to rock.
If you follow these first three steps of the six steps to a flawless home purchase, you should be in great shape. You can’t do any more mortgage due diligence than that. The only way you could be more prepared to buy a home is if you had the money in the bank and were prepared to write a check for the entire purchase price.
But there are a few more things you can do to ensure the rest of your transaction is flawless.
Carefully Select Your Realtor
It is so important that this is not just someone who’s qualified in helping the average person move across town. You are looking for someone with relocation, ideally physician relocation experience. You should be able to find such realtors through an online search, via referral from the medical department you are joining, a colleague who has recently relocated to the area or through a referral from a loan officer specializing in physicians. If you can’t find a realtor with experience with physician relocation, then the next best thing is a realtor who specializes in relocation because that person will have a little more specialized knowledge of the potential pitfalls and be attuned to serving clients remotely.
Remember, the timing of your employment contract start date, relocation and remote closing all add complexity to the transaction. The realtor who is the biggest short sale or foreclosure specialist in the county might be capable of doing amazing things for his short sale clients, they may be busy and sell more homes than anyone. BUT that same busy realtor, if not experienced in the nuances of relocation, is more likely to forget the remote closing timeline and leave you keyless on move in day. I see it much more frequently than anyone would like.
A great realtor will map out the transaction with you, pull out a sheet of paper and talk through all the dates with you and map out the transaction. That way when he is structuring the offer and the deadlines, everything flows and matches, so you don’t get to the end of the deadline, and realize, you’re family is homeless for two weeks because of a delay on the seller’s side or because the Realtor and loan officer we’re not in communication about when your loan could close.
Stay in Communication
Make sure everyone is on the same page and has the same dates in mind for the loan approval, wiring of closing funds, loan document signing and move-in date. This is especially important for relocating physicians who often have movers scheduled and a relatively short timeline to move in and get settled before starting their new position. Make it a point early in the transaction, even before you write-up your offer or go house hunting, to get your loan officer and Realtor on the same page. This is important that these two advisors are in communication about loan type, financing and appraisal deadlines, as well as the all-important closing and move in date.
What can happen in a transaction is that everybody gets focused one thing, like the appraisal or the outstanding final signed employment contract or whatever the potential hang up might be and they take their eye off the relocation piece and end up missing a date.
If you get into the habit of staying in communication with your realtor and loan officer throughout the transaction, you’ll prevent a lot of problems. It is as easy as firing off an email to both parties saying: “Hey, team, I’m selling my house on Wednesday and I’ll be in Ohio that day, I need to move in and have keys Friday afternoon for the Arizona home. Everybody on board, do you see any problems with those dates?”; “Hey, did you get everything you need from me? Is there anything else you need?”; “My financing appraisal deadline is coming up this Friday. Just wanted to make sure that was on everybody’s radar and we were not going to have any problems with that.”; “Hey, team, Just verifying that financing and appraisal deadline is next Monday, which means my earnest money is nonrefundable. Can you confirm we are good to pass this date?”; or “Hey, team, closing deadline is a week away. I’m confirming that everything is set and my family will be in a moving van on Wednesday.” For anything having to do with deadlines or the dates you will be traveling, I would recommend being in direct communication with both the Realtor and the loan officer.
The frequency of your communication may vary depending on the transaction, but I think once or twice a week is probably the recommended dosage. That’s not too much and not too little. If you send communications a couple times a day or daily, you’re going to drive everybody crazy.
Even if you are working with a great Realtor and loan officer team, keep in mind that things happen. The loan processor goes on vacation, the kids get sick, real-life stuff happens and things can slip through the cracks. As a consumer, if you’re not communicating what your expectations are with the deadlines, you’re leaving yourself open to possible mistakes.
6. Be Proactive
Take responsibility for the deadlines you sign on your purchase agreement and ensure you don’t lose your earnest money. This is truly your responsibility and all you have to do is to be aware of your inspection, appraisal, financing and settlement deadlines. I find most home buyers rarely even know the deadlines in a purchase agreement even exist. It’s extremely seldom that we get any kind of communication from the client following up on these dates. This is typically because the Realtor rushed through the purchase agreement and did not bring it to your attention, but at the end of the day this is on you, it’s you who is risking your earnest money. You can do this simply by paying attention to the dates in your purchase agreement and set yourself reminders to follow up with your real estate and mortgage team before the dates are upon you and your money is lost.
Follow this advice and you have a 99 percent chance that your transaction will be a successful and enjoyable one!
The following success story is from one of our favorite physician clients, Dr. Peters, who orchestrated the perfect transaction.
Dr. Peters had built a conservative home in a great new neighborhood when he was new into practice. They had purposefully bought a smaller, less expensive home so they could focus on eliminating all debt, which he did over the next six or seven years. Several years after he had built his home, the house directly across the street from him was built and from the minute it was framed, it was his wife’s dream home. It was bigger, with nicer finishes, on a better lot and of course more expensive. It was what they wished they could have built when they built their home, but they felt it was out of reach until they had finished paying off their student loan debt.
Dr. Peters stuck to his plan and paid down all of his student debt. Shortly thereafter, as luck would have it, the owners of the house across the street, told them that they were going to sell their home.
Dr. Peters started researching lenders. He called a few doctor friends but nobody had particularly enjoyed the lenders they had worked with and he was unable to get a good referral. He went online and searched for “physician home loan” and came upon our site. He called me and we had a nice conversation discussing his situation. He had some unique factors and had made a few investments that had gone bad. Although he had paid off all of his debt, he hadn’t accumulated the savings that he would have liked for a down payment. I advised him a physician home loan without mortgage insurance was his best option because he needed a jumbo loan size with less than twenty percent down.
After our conversation, Dr. Peters continued his due diligence by visiting our website and reading all the testimonials. He knew two of the clients who’d given us testimonials. One was a doctor and the other was a member of Utah Medical Association Financial Services and coincidentally Dr. Peters’ financial planner. He called them both to ask them about their experience with us.
When we had our second phone conversation, Dr. Peters was certain that he was comfortable moving forward with us. We had a great relationship and trust because he really had done his due diligence and research upfront. I advised him, before you write your offer and become completely emotionally attached, allow me to gather all of your documents, complete your Credit and Income Approval and ensure you will qualify without any surprises. Dr. Peters was very prompt in getting me all the documents we needed and we submitted his file for Credit and Income Approval. Within twenty four hours, the file came back, underwriter approved.
He then was able to make a very strong offer to his neighbor, saying we’re completely qualified, already having been through underwriting, we have our down payment ready and we’re willing to make you an offer with no realtors involved and we’ll close in two weeks. Of course, the seller took the offer and Dr. Peters got a great price on the house.
We closed two weeks later and his wife finally got her dream home.
Seeing success stories like Dr. Peters is what it’s all about for us. I hope you will take these Six Steps to a Flawless Home Purchase to ensure that your loan process goes as smoothly and is as stress free as possible.
Josh Mettle is an industry leading author and mortgage lender, specializing in financing physicians, dentists, fellows, PhDs, and physician assistants. You can get more great physician real estate and mortgage advice at http://www.utahphysicianhomeloans.com/ or his book site: www.whyphysicianhomeloansfail.com.
Josh is also a fourth generation real estate investor, and owns a number of rental homes, apartment units and mortgages. Josh is dedicated to helping physicians become more financially aware and able, download Josh’s latest tips and advice at www.physicianfinancialsuccess.com.