How to Secure Financing Without A Realtor [Part 3 of 8]

This is part 3 of the 8 part series on how to buy a home without a realtor. Today we are talking about how to secure financing without a realtor.

Typically, when you reach out to a realtor, they would recommend their lending partner whom they probably have worked together before. Usually this means that the lender is dependable, will do a quick pre-approval, and help with the closing.

Since this guide is to help buyers to buy a home without a realtor, the direct access to a trusted lender via your realtor isn’t out of the question, so this guide will walk you through where to find a trusted lender, what to look for in a lender, and some common terminologies on lending so you can have a good understand about the lending process.

Lending Process From Pre-Approval to Closing

The lending process begins with getting pre-approved for a mortgage.

Pre-approval is a critical first step that involves submitting financial information to a lender, such as your income, assets, debts, and credit history.

The lender evaluates this information to determine how much they are willing to lend you, giving you a clear idea of your budget and making you a more attractive buyer to sellers. Pre-approval letters are essential during the home buying process because they demonstrate to sellers that you are a serious and qualified buyer.

This is especially important since you are buying a home without a realtor. One way to get a showing with the listing agent is to send them your pre-approval letter, prove that you are qualified buyer who can afford this home, so you are not wasting people’s time.

Once you find a home and have your offer accepted, the lending process moves into the underwriting phase.

During underwriting, the lender will conduct a thorough review of your financial status, verifying the information you provided during pre-approval and assessing any additional documentation, such as tax returns, bank statements, and employment verification.

Concurrently, the lender will order an appraisal of the property to ensure it is worth the purchase price and conduct a title search to verify that there are no legal issues with the property’s ownership.

We will talk more in detail in later parts of this series on how to buy a home without a realtor.

If the appraisal and title search are satisfactory, and the underwriter is confident in your ability to repay the loan, you will receive final approval. At this point, you will receive a Closing Disclosure, outlining the final terms of your loan, including the interest rate, monthly payment, and closing costs.

You will review and sign this document, and then proceed to the closing. At the closing, you will sign all necessary paperwork, pay any remaining closing costs, and receive the keys to your new home. The lender will then disburse the loan funds to the seller, completing the transaction and making you the official owner of the property.

What to look for in a good lender

Choosing the right lender is very important, especially since you are buying a home without a realtor. You want as much as the professional help as you can. you’ll make in the home buying process.

A good lender is not just about getting the best interest rate – it’s important, but not the most important, it’s also about finding someone you can trust and who understands your unique situation.

The two things I look for in a good lender is number one: great customer service. This means reply to your message within a reasonable timeframe.

For pre-approval, see if they can deliver within 24 hours after you sending them every documents needed. This is usually a good indicator on how successful they will be when it comes time to close.

During the underwriting process, are they following up to remind you to upload all the required documents? Are they keeping you posted about when they are scheduling an appraiser? If you are on track to close on the home?

I know you can’t know these unless you’ve worked with the lender before, that’s why you should ask these questions before start working with them.

The second thing I look for is you want a lender who offers a variety of loan products that fit YOUR specific needs.

Whether you’re a first-time homebuyer needing an FHA loan, a veteran looking for a VA loan, or someone considering the benefits of a fixed-rate versus an adjustable-rate mortgage, your lender should guide you to the best option for your situation.

Make sure to compare interest rates, fees, and closing costs from several lenders. A transparent lender will clearly explain all associated costs and won’t hit you with unexpected fees down the line.

And I will go over them quickly in this next section.

Understand lending terms

• Principal: This is the amount of money you borrow to buy your home. It’s the base amount that you will need to pay back, excluding interest.
• Interest Rate: This is the percentage of the principal that the lender charges you to borrow the money. It can be fixed (stays the same throughout the loan term) or adjustable (changes periodically based on market conditions).
• Annual Percentage Rate (APR): The APR includes the interest rate plus other loan fees, providing a broader picture of the cost of borrowing.
• Down Payment: This is the upfront payment you make when buying a home. It is usually expressed as a percentage of the home’s purchase price. A larger down payment can often secure a better interest rate.
• Loan Term: This is the length of time you have to repay the loan, commonly 15, 20, or 30 years.
• Private Mortgage Insurance (PMI): If your down payment is less than 20%, you might need to pay PMI, which protects the lender in case you default on the loan.
• Escrow: An escrow account is set up by your lender to pay your property taxes and insurance. Part of your monthly mortgage payment goes into this account.
• Closing Costs: These are fees paid at the closing of a real estate transaction. They can include loan origination fees, title insurance, and appraisal fees.
• Points: Also known as discount points, these are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point equals 1% of the loan amount.
• Amortization: This refers to the process of spreading out loan payments over the term of the loan. Each payment includes both principal and interest, with more interest paid at the beginning and more principal paid as time goes on.

Conclusion

This serves as a quick guide on how to secure financing without the help of a realtor. The key point is to find a lender that is responsive, and is willing to provide guidance on the best loans for you.