how to buy house or land? get prequalified first from bank or Sign a Buyer Broker Agreement

Asked by sanjuan bejo, Hesperia, CA Fri Mar 1, 2013

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Jeffrey Bayer, Agent, Desert Hot Springs, CA
Wed Jul 2, 2014
Don't want to get too technical here...a "prequal" letter simply tells an agent you have talked with a lender and based on your credit report and what you said your income level is, they'll write a letter prequalifying you for a certain amount. That letter is not a guarantee of a loan- period. However, you need to have this letter in order to present an offer on a home. Plus, you need to either place with your agent's office what is called "Earnest Money Deposit" or EMD. This shows the agent representing the seller (listing agent) and the agent representing you (selling agent) you are serious about making this offer come true. The EMD counts against your closing costs (see below).
Signing a Buyer/Broker Agreement ties you to that specific Broker- regardless. In essence, you are committing to that agent's broker (the "selling" agency) that they'll get paid regardless of who shows you the home, no matter who, how, or when. If you've signed one, you either need to cancel or commit to letting that agent/broker do their job and find your new home.
When it comes to mortgages, remember this- You have a lifestyle (clothes, date nights, movies, clubbing, whatever). You should consider how much your lifestyle is paid from your income and then budget for your home, and maintain your lifestyle (or way of living). A really good REALTOR will always consider your lifestyle into the equation...we want you living a good life and being a homeowner- not working your bottom off to be a homeowner...Find a good, honest REALTOR who will work hard to protect you from the pitfalls of home buying- it can be daunting. Also, learn as much as possible about mortgages, invest the time in it because the most perplexing part about buying a home is in the details- and mortgages are all about the details. Sometimes you'll think; "Why do they need to know that?". The answer is because it is in the rules of lending, always has been, hasn't really changed all that much- lenders were allowed to get a little less diligent before 2007.
PS- You're going to need 3.5% (roughly) of the purchase price to pay for expenses. On a home that goes for $100,000 that's $3500, plus the appraisal and home inspection (the last 2 are not in the percentage quoted) but your EMD does. Many agents say to get the seller to contribute $$ helping you cut costs, but don't count on the seller agreeing. Right now, its considered to be a "seller's market" (low inventory drives up sales prices- part of supply and demand). A "buyer's market" is when there are many homes for sale and not enough buyers (high inventory can drive prices down- again, supply and demand).
Remember, its real estate- anything can happen (and it usually does!)
We're here to help!
1 vote
Jose Ixmay, Agent, Chino Hills, CA
Fri Mar 1, 2013
Good Afternoon,

I would recommend getting pre-qualified first. Reason being that you want to know what you qualify for and that you are comfortable with the terms (payment, interest rate, etc.). Once you have your pre-qualification you can do your research as to what agent you want to work with. Make sure you ask questions of the loan officer as to financing types offered and what is the process for switching loan types. For example, switching between an FHA 203b and 203k or conventional product. The more products a loan officer has to offer, the better chance you have to finding the home you want at the best terms.

I hope that helps. Good luck, and let me know if I can be of further assistance.
1 vote
Cindy Davis, Agent, San Diego, CA
Fri Mar 1, 2013
Great question. Get your loan pre-approval first. It's hard to go shopping when you don't know what your budget is.

Secondly, I would be cautious about signing a buyer-broker agreement unless you are absolutely sure of the agent. Although many fine agents use these agreements, there are still plenty who do not use them...

My feeling is that it's hard to sign up for 'going steady' unless you've had a few good dates first!!

Good luck.
1 vote
Arpad Racz, Agent, San Jose, CA
Tue Feb 23, 2016

Starting with a pre-qualification is a good first step.

Kind regards,

0 votes
Susie Kay, Agent, Dallas, TX
Tue Feb 23, 2016
I know this is an old discussion but is still applicable. It's best for any home buyers who are needing a loan to obtain a loan first and then work with a local realtor. Or call a local realtor and ask for a lender referral.
0 votes
Sheryl Arndt, Mortgage Broker Or Lender, Woodland Hills, CA
Mon Feb 22, 2016
Hello sanjuan bejo, you will need to be pre-approved if you decide to buy and to be able to meet an agent to view and submit offers on any homes of your choice. Your qualifications will be determined by your credit profile, debt to income ratios, fico scores, loan program and how much you want to invest into the down payment and closing costs.

You may qualify FHA from fico scores between 500-579 with 10% down or minimum 580 fico score may qualify FHA 3.5% down. You may consider a 3%-5% grant down payment program up to 417k from a minimum 620 fico score which does not have to be repaid. You may consider 3% down conventional from a minimum 620 fico score or even 5% down conventional with NO Mortgage insurance (Lender paid MI) up to 417k.

If you figure out what cities/zip codes you are considering, minimum number of bedrooms and the maximum payment/price you are looking to achieve you can be emailed listings to fit your search criteria. Your email address is needed to set you up for the automatic daily updates.

The listings in Oak Hills start from 254k for 4bd 2.5ba single family home and from zero down payment with the USDA Rural zero down program from a minimum 580 fico score. It only takes a few dozen questions to qualify, go over your options and email you listings to study and compare. Here are some links to study as well as web reference links to many loan program pages offered...

Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
Veteran & VA/CalVet Loan Specialist
REO & Short Sale Specialist
Credit Repair At No Cost
ALL Loan Programs Available
22+ Years Experience
BRE# 01140252
NMLS# 297251
9am till 5pm by phone Monday thru Saturday, Sundays by appt., EMAIL ANYTIME 24/7 or
0 votes
John Souerbry, Agent, Fairfield, CA
Fri Mar 1, 2013
I used to say "get pre-qualified first", but now I say it's better to find the right broker first. Only a broker can give you a complete picture of the market so that you can focus on getting pre-qualified for the right type of property loan in the right price range. Most brokers will take you through what's available in the market and then wait patiently while you get pre-qualified.
I also highly recommend that you have a discussion with your tax guy regarding what impact a home purchase will have on your tax situation. Neither a broker nor a mortgage lender are qualified to advise you on tax and personal financial planning.
0 votes
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