Researching property market on your own is recommended before hiring a real estate agent. Once you purchase a property real estate agent will pick up their fees and move on, but you will end up owning the property you buy until you sell it off. There are many benefits of having a real estate agent (and I recommend to have one especially for first time buyer), but real estate agents also tend to push for purchase with higher price tag for a quicker and higher payout.
It is essential to know your mortgage expectations and the price range. What is the desired price range? What is the maximum price and down payment you can afford? What is the highest monthly payment you can afford and your desired monthly payment? Look at your banks statements and find out your earnings and expenditures and the maximum payment you can allocate for a house.
On top of your down payment, loan officers will ask you to have some extra cash for closing cost and more, which varies per case and per loan officer. You can get the best mortgage rates with 20% down (25% down in case of a condominium) or higher. Are you getting a fixed APR or variable APR? What would be your monthly payment? Are you including mandatory monthly payments such as HOA fees, Mellos Roos, and property tax? How about your tax deductions from the purchase and monthly payments?
Consider getting pre-approved for a loan before touring houses. After the house market crash in 2005 and financial crisis in 2008, pre-approval process for a mortgage loan became more demanding. Many documents, including your past tax reports, credit report, employment situation, and pay stubs, will be requested. You will be asked to provide proof for the down payment if the money was deposited to your account within two most recent months. Proof can be in many forms such as salary or gift money from a relative or a friend. The down payment money can’t be a loan from a relative or a friend because that means you are adding to monthly payment. If it is a gift money, it will need a notary stamp, even if the money is coming from outside of United States.
For a single full pre-approval process, sensitive documents such as SSN and tax reports must be provided. Therefore, it could be wise to be selective in choosing a company for pre-approval process. Consider getting recommendations from your friends and family. Read online reviews. Some lenders actually post mortgage rates for typical rates on their website. Select few lenders and query them before they force you to hand your sensitive information. Ask if a lender can match a competitor’s APR rate. You could ask for expected closing cost on desired mortgage loans. Closing cost from one lender can be twice bigger than another one under same mortgage terms.
After the pre-approval process, the loan officer will let you know the expected monthly payment based on your price range and preferred mortgage loan type. Loan officer will also reveal the expected closing cost and the extra money needed on top of down payment in your bank account.