Resident's Guide to Buying a Home and Using the Doctor's Loan
House Shopping & Pre-Approval
Now that you have a realtor it is time to actually do the only fun part of this process--look at houses! It's easiest if you have an idea of what type of house and location you want. Most Realtors will ask you a number of questions about the type of house you want. Feel free to do some homework before then so you can just tell your Realtor what you want. All Realtors have access to the same MLS database where they enter your search criteria and provide you with the results. Feel free to find places on your own (e.g., via the internet, house shopping magazines, newspaper, local driving, etc) and ask your Realtor to setup appointments to view them. This includes for sale by owner (FSBO). Most Realtors won't give you FSBO results, so you may have to look into these on your own.
An important step in the house shopping process is to get an appropriate pre-approval so you know about how much money you will be working with when you get your final loan and some Realtors will want to see this before you being looking. There are a number of factors that go into calculating the pre-approval amount (e.g., credit score, salary, debt, other fixed monthly payments) and it may be best to take care of this before you actually get started looking at houses. This will help you avoid wasting time looking at places you can't afford. One option is to get pre-approved first, then let your Realtor know the price range within which you wish to look. The other option is to simply choose a general price that you are willing to pay and have the realtor send you options in that price range. Once you find something that you like, go ahead and call to be pre-approved for that amount.
Getting pre-approved is very easy. There are three important tips you need to know. Pre-approval is free, can be done by multiple banks, and can be done more than once if the price of your house changes. Simply call any bank that has the doctor's loan that you are interested in and let them know you would like to be pre-approved. This certainly does not need to be the bank with which you will eventually fulfill your loan. This first step is to simply get an idea of how much a bank is willing to loan you based on your credit history. Make sure, however, that the pre-approval is based on the doctor's loan and not some other loan the bank also offers. Lastly, if any bank tells you there is a fee for pre-approval, this is not true. There may eventually be an application fee when you actually apply for a loan, but that certainly does not need to be paid prior to any pre-approval.
You can be pre-approved with multiple lenders, but this is essentially unnecessary. If you are pre-approved with one lender, then chances are you'd be able to be pre-approved with any lender. The exception is if you have a questional credit history or special circumstances. Once it is time to apply for an actual loan (a separate process from pre-approval), you'll want to shop around with multiple lenders to see who has the best rate. Pre-approval with that specific lender is not generally required to shop rates (ask for a good faith estimate). Some regular mortgages (i.e. not through the doctor's loan) will vary rates based upon your credit score. The doctor's loan programs with most lenders are pretty fixed and require a credit score greater than 700 and then do not have any variability in rates if your credit score is even super high. So pre-approval with more than one institution is not really necessary. When you go to rate shop, you can do this in 5 minutes if it turns out they require it.
As a side note, some people wonder if having multiple lenders checking their credit will hurt their credit score. This may prevent some individuals from being pre-approved by more than one bank, or hesitating on getting a pre-approval because they only want their credit to be checked once. Fortunately, there is a law that states that multiple credit checks from mortgage lenders will not adversely affect your credit. Now this only applies to mortgage lenders and the checks must be done within a 30-day window. Some people say three weeks, and some say it is longer than 30 days, but I have been told 30 days on more than one occasion. Moreover, I was pre-approved by three banks and my credit score was the same each time.
Written by: Randon T. Hall & Ben Rosenbaum, Copyright © 2008
