If you’re beginning to think about buying a place in SF, there is one sure-fire thing that you should do before you spend too much time visiting open houses. Get pre-approved for a mortgage. Until you know how much home you can comfortably afford, it really doesn’t make much sense to fall in love with the place of your dreams. Unless you are just browsing with no intent to buy soon, looking at homes before getting pre-approved for a mortgage is a bit of a cart-before-the-horse kind of thing. It is easy to fall in love with the perfect place when you see it. Unfortunately it is also that much more disappointing to learn that it is financially out of reach.
I suggest that buyers get pre-approved for a loan with two different sources. One direct lender (for example, Wells Fargo) and one local mortgage broker. As I have mentioned before, the big banks are notoriously quite slow and bureaucratic when it comes to issuing mortgages. The reason is simple, they are huge organizations that make money by selling off bundles of mortgage loans. They can only do that if certain loan underwriting criteria is adhered to from the outset with every buyer. Careful mortgage underwriting is certainly good (hello 2008, I’m looking at you) however the slow-moving process can sometimes present problems for buyers who are trying to purchase a home in this very fast-paced seller’s market. Bottom line here is that sellers are really not interested in waiting around to see if you happen to get your loan or not.
A mortgage broker has access to many loan sources, from small banks to local portfolio lenders, all of which tend to move much faster than big brick & mortar banks. Mortgage brokers also know that properties in San Francisco often come with some local idiosyncrasies that do not exist in other areas. When underwriting with one lender is not working out for a buyer, a mortgage broker can move the loan to another lender to get approval. I can suggest a number of reliable San Francisco mortgage brokers that have helped my clients over the years. Guaranteed Rate, Opes Advisors, Guarantee Mortgage are three examples. Let me know if you’d like any specifics about who to contact at each company.
By the way, some lenders and mortgage brokers offer the ability for buyers to get fully approved in advance (not just the customary pre-approval). If your lender offers it, do it. You will be ahead of the many buyers who don’t take this extra step in advance. Buyers are increasingly competing to get properties. It makes sense to be as prepared as possible.