First step when buying a home: check your finances
Feb 2011 03

It can’t be said enough times, if you’re looking to buy a new home, the first thing you should do is organize your finances.

It happens time and again, a potential buyer starts looking before pulling a recent credit report, or organizing a couple years of tax returns and income statements, or without talking with a mortgage broker.

And, time and again, when the buyer finds the perfect home, the deal can’t go forward because of some previously-unknown problem – an unpaid debt, lack of proof of income, a lien on a property.

Here’s an example case, courtesy of the New York Post, where an agent sits down with a potential client.

I begin gently: What are you looking for exactly? What have you seen so far? Why are you looking now? What’s your plan? Do you need a mortgage? Do you need to sell before buying?

He replies: “I wouldn’t be wasting my time talking about it with you if I couldn’t afford it, and if you don’t believe me, maybe we shouldn’t be working together.”

:: sigh ::

The agent isn’t prying just so he can know juicy details on the buyer’s financial situation. He’s asking because he needs to know he’s not wasting his (and his buyer’s) time.

I had a client once who wanted to go out to see places. “Money won’t be a problem.” I pushed him gently to speak with a lender, first, but he wouldn’t listen. He was a nice guy and I figured he’d buy, someday, so I took him out twice. Then he called me, one day. “Oh, so I spoke to the bank. I guess I need a social security number and proof of a couple years of income and some credit history in order to get a mortgage.”

Yes, you do.

:: sigh ::

Like a patient narrating their sexual history to a doctor, it’s a delicate conversation this would-be buyer and I are having. People with money are often good at many things, but explaining themselves doesn’t top the list — because they tend not to need to.

Exactly.

It’s not necessary to give your agent all the nitty-gritty on your personal life. You don’t have to tell him/her your income or financial background. All he/she wants you to do is get a pre-approval letter from a lender. In doing so, you’ll have had to pull together some financial data and therefore be in great position to make an offer, if and when you find the perfect home.

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