Thinking of buying a home in the Springfield, MO, area?  There are many things to consider, and many steps to follow to ensure a smooth purchase. This is the first in a series of posts that will help guide you through the homebuying process.

The first step in the process is to get preapproved for a loan. You need to know how much money you will be approved to spend on your new purchase, and what monthly payments you will be comfortable with.  Because the lending requirements and guidelines are changing on pretty much a daily basis recently, it is necessary to have a "fresh" preapproval.  Just because you were prequalified six months ago, doesn't mean you will qualify for the same loan today.

Here are a few tips to follow when searching for your loan:

Know how much money you can spend:  Nothing is more discouraging than shopping through online listings of $200,000 homes, just to find out you can only spend $150,000.  Many online mortgage calculators will quote loan amounts that only include principle and interest.  Remember, you must calculate in taxes, insurance, PMI, etc., into your monthly payment. 

Know what type of loan fits your needs the most:  I've had clients who insisted on getting a VA loan because it does not require a down payment; however, the rural development loans do not require a down payment either and in many cases have lower interest rates and monthly payments.  Talk to your lender about what loan fits your needs the most.  Rural development loans can be used in an area where the population is less than 20,000.  In the Springfield, MO, area, communities such as Ozark, Republic, Rogersville, Clever, Sparta, Highlandville, and others, still qualify.  Springfield and Nixa do not qualify.  Your lender will be able to look at your specific situation and find a loan tailored to your personal needs.

Know what type of lender to use:  There are many factors to consider when selecting a lender.  Sometimes going to your local bank will cost you more than a lender that specializes in mortgage loans.  Questions you need to ask are:

• Are they loaning their own money?  Or are they selling you someone else's loan, such as Wells Fargo or Bank of America?  Any time a lender sells you a loan, there are charges for doing so.  A lender that loans their own money oftentimes does not have fees as high as one who acts as a middle man.  These lender will most often sell your loan after it closes.  None of the terms or conditions can change.  Your loan will be bundled in with hundreds of other loans and sold to another lender, such as Wells Fargo or Citibank.  I have actually had a client choose an in-house lender over Wells Fargo, only to be sold off to Wells Fargo after closing.  Now...they have a Wells Fargo loan cheaper than they could receive going through Well Fargo.
  
• Do they have their own in-house underwriter?  Or are they going to ship your file off to an underwriter who is located out of state and out of touch with your loan officer?  Having an underwriter in-house can save a lot of last minute headaches and delays in your closing.
• Get a Good Faith Estimate:  Different lenders charge different fees.  For example, some charge a document handling fee, while others do not.  Always ask for a Good Faith Estimate so you can see the itemization of charges you will be responsible for.

Know how to compare apples to apples:  When comparing lenders, it is important to compare the charges on the Good Faith Estimate.  Many buyers simply look at the bottom line - which lender has the cheapest closing costs.  Look to see if the charges between lenders are similar.  For example, does one lender have your taxes estimated higher than another?  Are the charges for the title company similar?  Are the prepaids similar?

Know your payoff:  One factor that is often overlooked is how much your payoff will be the day you close on your loan.  While one lender may have a lower interest rate or closing costs, will you actually be financing more than a loan with a slightly higher monthly payment or interest rate?  A difference of $1,000 or $2,000 may not seem like much today, but if your job forces you to relocate in two years and you are faced with selling your home, that small difference will suddenly seem very large.

Know the difference between a prequalification and a preapproval:  In today's market, it is so important to be preapproved rather than prequalified.  A prequalification is when you have spoken with a lender, verbally given the information regarding your income and debts, and the lender has run your credit report and validated your credit scores.  Many lenders will give you a prequalification letter contingent upon receiving supporting documentation of the information you have given them verbally.  A preapproval is when the lender has been provided your supporting documentation and your information has already been given approval by the underwriter.  Most listing agents are requesting preapproval letters during offer negotiations.  Having a current preapproval letter means having more negotiating power and less stress in your home purchase.

Shopping for a loan can be frustrating for a buyer who has not been through the process before and doesn't understand the terminology many lenders use.  Never hesitate to discuss your financing options with your Realtor.  Local Realtors understand the average costs in their area and can help determine if you are being overcharged for services, as well as provide close estimates for items such as taxes and insurance.  They are also familiar with local lenders and will be able to provide you with a list of reputable lenders in the area.

Stay tuned for Part II - Selecting your Realtor.

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Lina Robertson Jones Owner/Agent RE/MAX Solutions 1715 James River Road Ozark, MO, 65721	Mobile: (417) 844-7265 linarobertson@remax.net http://www.ozarks-realestate.com
RE/MAX - Outstanding Agents, Outstanding Results!

About the author:  I am full-time REALTOR® with RE/MAX Solutions in Springfield, MO, and a member of the Greater Springfield Board of REALTORS®.  I have helped hundreds of families in the Springfield, Nixa, Republic and Ozark real estate markets, whether buying a home, or selling a home.  Visit my website at www.ozarks-realestate.com to search for All Springfield MO Area MLS listings.  Want to know what our market is like?  My website is also an excellent resource for current Springfield MO Area Real Estate Market Reports, as well as current market reports for Ozark, Nixa, Republic, and Rogersville.