What First Time Buyers Need to Know . . . Why a Car Loan is NOT The Same as a Home Loan

By
Real Estate Broker/Owner with BuyersAgentPortland.com | (503) 810-7192 Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time Licensed State of Oregon
http://actvra.in/HjP

Lenn Harley has epiphanies.  When she does, she shares them with us and they're really good!!

I had one the other day (Saturday, to be exact) when I received a call from a first time buyer.  While talking to the nice young man something weird happened. 

I said, "You know, getting a car loan is the EXACT OPPOSITE of getting a home loan."

And I explained:

  • A car buyer goes in to the lot.  They test drive the vehicle, like it and then they apply for a loan.  The mantra of "What can I do to get you in this car today?" is often heard. 

When buying a car, the financing is done AFTER the decision is made to buy the car.  And boy howdy, they'll find a loan for the car buyer.  No credit, low credit, crappy credit . . . NO PROBLEM!  They'll be able to finance a car loan.

NOT SO WITH HOME BUYING!

  • A home buyer goes in to the house.  They check it out, like it and then . . . if they make an offer based on the "car buying" mentality of applying for a loan AFTER they've found a home, they might not be able to close the deal.

Why?

Financing guidelines.  Plain and simple. 

  • Buyers might be looking at property they are unable to qualify for
  • The home buyers income-to-debt ratios are too close and they need to come up with more down payment in order to purchase . . . which they may not have
  • The buyer CAN qualify, but opps, someone with a pre-approval submitted an offer and the seller opted to go with the buyer who was pre-approved
  • The seller doesn't want to accept an offer which isn't backed up with the Buyer's pre-approval
  • and the other reasons buyers can get turned down for a home loan are vast and varied

It was an epiphany . . . or something like that.

If you're buying a home GET YOUR FINANCING IN PLACE BEFORE YOU GO OUT AND KICK THE TIRES!

The seller is NOT OFFERING FINANCING.  They won't be able to get you in the home today . . . unless you show them your pre-approval with your offer!

Posted by

Buyer Focused ~ Buyer Results

 

Representing Buyers in the Portland Metro Real Estate Market | Clackamas Multnomah and Washington Counties | Since 1999

Carla Muss-Jacobs, REALTOR®, ABR, CEBA, ePro
Principal Broker/Owner

Direct: 503-810-7192 | BuyersAgentPortland.com | Carla@BuyersAgentPortland.com

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  1. Ed Silva 09/07/2012 06:51 AM
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Topic:
Home Buying
Location:
Oregon Washington County
Groups:
Realtors®
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Tags:
obtaining a home loan
obtaining a car loan
first time buyers

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Rainmaker
713,607
Larry Brewer
Nashville Real Estate
Benchmark Realty LLc

Now I know why first time home buyers are so confused. I will say the the guidelines now are way out of line compared to common sense, as they were 7 years ago. Maybe some day the community reinvestment act will get the credit it deserves for crashing the housing industry.

September 06, 2012 04:44 AM
Rainmaker
247,967
Carla Freund
Your Raleigh - Cary Relocation Specialist
Keller Williams Preferred Realty

Hi Carla,

Good point! Buying a house is generally unlike anything a first time homebuyer has experienced.

September 06, 2012 04:47 AM
Ambassador
1,637,838
Fernando Herboso - Broker for Maxus Realty Group
301-246-0001 Serving Maryland, DC and Northern VA
Maxus Realty Group - Broker 301-246-0001

This is a good explanation. . .and a reminder when you are kicking the tires. . you need to have your agent present!

September 06, 2012 05:52 AM
Ambassador
923,727
Amanda and Jared Christiansen, YOUR Fort Wayne Realtors
Century 21 Bradley.
Century 21 Bradley (260)704-0843

I couldn't agree more Carla.  Get approved first!  Good post.                                                                                              

September 06, 2012 06:08 AM
Rainmaker
891,496
Michael Setunsky
Your Commercial Real Estate Link to Northern VA
Michael's Commercial LLC

Carla, you are absolutely right! Buyers do have buying a car mentality. Why, because they don't know any better. Many buyers especially first time buyers have bought cars, but not a home. They need to be educated as to the home buying process. Great Post!

September 06, 2012 06:11 AM
Rainmaker
491,890
Amanda S. Davidson
Your Northern Virginia Realtor
Living A Dream Real Estate

Carla- You are spot on. What a genius epiphany. What people don't consider when buying a car is they should be pre-approved before they go look at them too. Now, if I could just get a recording of your epiphany to play for my clients that don't want to be preapproved before we head out!

September 06, 2012 06:39 AM
Rainer
54,802
Kim Mulligan
Kim Mulligan "Your Go-To For Green"
Cooper Jacobs Real Estate

We are experiencing an upturn in our market in Seattle and don't have enough homes for sale in certain neighborhoods. The first day of touring with clients I make sure and make mention of that. If you are up against 12 offers, 9 with pre-inspections, do you think you even stand a chance with no pre-approval letter?

Of course this is an extreme recent real life example, but multiple offers aren't rare. Working with first time home buyers means a lot of educating, but that's our jobs!

Thank you Carla for a great turn of a phrase. It clarifies a complex idea.  It's being added to my quiver!

September 06, 2012 07:00 AM
Rainmaker
313,510
Sandy Acevedo
RE/MAX Masters, Inland Empire Homes for Sale
951-290-8588

Hi Carla, nice post. Gradually it is getting better with buyers seeing a lender first. A while back this was almost unheard of. Keep getting the word out!

September 06, 2012 08:02 AM
Ambassador
1,499,504
Ed Silva
Central CT Real Estate Broker Serving all equally
RE/MAX Professionals, CT 203-206-0754

Buyers especially first time buyers think that just because they pay a certain amount each month for rent, that the mortgage process is similar. Not. Buyers that don't know what their buying power may be just waste everybody's time. Good Post.

September 06, 2012 10:23 AM
Ambassador
1,480,006
Tammy Lankford
Your Lake Sinclair Expert (706-485-9668)
Lane Realty

I just had my laugh out loud moment for the day Carla.  I think I'm gonna ask next time I show a house "what can I do to get you in this house today?"  HAHAHAHAHA  This was great.

 

September 06, 2012 11:37 AM
Rainmaker
382,854
Fred Sed
Your Orange County Realtor, Why? Because Fred Sed
Orange County Short Sale Foreclosure Realtor

Great insight Carla! It's quite true. Sometimes I wonder though, whether it was just a formality to put the cart before the horse in the "Boom" years. "You're 98*? Sure, Here's money. buy whatever home you want. Knock yourself out!"

September 06, 2012 01:00 PM
Rainmaker
246,592
Bruce Kunz
REALTOR®, Howell NJ Homes for Sale
Bruce Kunz @ Veltri & Associates, 866-483-5874 x464

A-HA!  Well said, Carla. Harder yet is to convince buyers to NOT buy the car (or really even look at anything) until after they've closed on the home.
Bruce

 

September 06, 2012 01:56 PM
Rainmaker
646,935
Evelyn Kennedy
Alameda, Real Estate, Alameda, CA
Gallagher & Lindsey, Alameda, California

Carla:

If only home loans were as quick as auto loans.  Our jobs would be so much easier.  But I guess that is what go us in the mess we had to deal with for the past 4 years.

September 06, 2012 04:03 PM
Rainmaker
474,464
Cindy Westfall
ABR,GRI Your Tualatin & Portland Metro Real Estate
Premiere Property Group,LLC Portland Metro & Suburbs Oregon

Hi Carla, Love those ephipanies (sp) ..and this one was sooooo good! Your analogy put this in perfect perspective for buyers to understand the importance of getting the loan approval BEFORE they start looking. Love it!

September 06, 2012 05:09 PM
Rainer
195,131
Beth Paterson
NMLS #342859
Reverse Mortgages SIDAC, NMLS #173899

A good reminder and analogy.  The home loan process is so different.

September 06, 2012 08:29 PM
Ambassador
625,004
Doug Rogers
Your Pineville Louisiana Agent
Bayou Properties Realty

I have a couple of hard working mortgage brokers that will field my sign calls on the weekend. Buyers NOT willing to speak with these professionals (or supply a loan letter) don't get in the front door.

September 07, 2012 06:53 AM
Ambassador
1,470,973
Renée Burrows
Las Vegas Real Estate Broker - www.urLVhome.com
Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate

It's all fun and games until you can't buy the home of your dreams :)

September 07, 2012 04:16 PM
Rainmaker
203,307
Paige Walker
Real Estate Guru - Alexandria Pineville LA
Louisiana Lagniappe Realty, LLC

Yeah Carla!! That is so very true and I love the analogy.....Great Post!!

September 19, 2012 09:06 PM
Rainmaker
537,848
Ginger Harper
Your Southport~Oak Island Agent!
Coldwell Banker Sea Coast Advantage

A lot of difference...and we are not used car salesmen either

 

September 20, 2012 08:09 AM
Anonymous #42
Anonymous
Anonymous

Such a simple concept, and you communicated the comparison perfectly.

May 17, 2013 03:34 AM
Anonymous
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Rainmaker
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Carla Muss-Jacobs, Principal Broker/Owner

Buyer Focused ~ Buyer Results
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