First Time Homebuyer Tips : Understanding the total mortgage process -- Part 3 of 5
Shopping for a mortgage can be such a confusing process, even for those that have bought a home or refinanced previously. And in this first time homebuyers series, the biggest thing that I can't stress is the ability to pick that loan officer who will have your best interest at stake. I don't want this to be a debatable subject. There can be arguments based on :
- Make sure you get the loan officer through a referral (you can find people on the internet, such as myself - just be careful of such services that promise companies that will fight for you to give you the best rate)
- Make sure that the loan officer is local (this gets debated often - in regards to myself, about 80% of my business is out of state - 10 loans that I closed this year were out of state and denied by local lenders)
Hence why I am not looking for debates based on the information above. I wanted this to be an informational piece, just keeping you informed.
Here is the basic process when shopping for a mortgage :
- Shop for a mortgage - The loan officer should have an interview process, asking you questions.
- Get pre-qualified or pre-qualified - Make sure that they went over your credit in detail
- Once you choose that lender, apply for a mortgage
- Get all documents to your lender, ie. pay stubs, W-2's, bank statements, credit explanation letters
- Make sure you talk about locking in your rate or floating - understand the difference
- Wait for the lender to process your mortgage loan and underwrite it to approve it
- Once approved, help getting the conditions in and have your homeowners insurance ready
- Get ready to close on your mortgage and celebrate
Here are some of the basics that you should be aware of......
Beware of those online mortgage calculators. You need to focus on :
- Property taxes - even in the same location or on the same purchase price, taxes can vary, so get an average.
- homeowners insurance - start early in the process of getting homeowners insurance quotes. Even if you haven't found a home. And don't wait until 5 days before settlement, because each dollar could make a difference, and could possibly affect your mortgage approval.
- mortgage insurance - each program is different if you don't put 20% or more as a down payment.
Overall, these calculators don't give you the real payment.
Mortgage Interest Rates - One of my biggest pet peeves. Too many people focus on interest rates and allow themselves to get sucked up into the hype. Your loan officer's focus should be on what kind of mortgage payment that you are comfortable with and not selling you rate right from the get go. yes, many of us have different ways of selling. But you can't get the lower rate unless you have more money to buy it down. Something a true mortgage professional will share with you and not ignore. Please read : Payment vs Rate And when shopping for a mortgage, don't just shop APR (Annual Percentage Rate). Please read : APR vs Interest Rate
Locking into an interest rate - Another pet peeve of mine. When you actually shop for an interest rate, many loan officers will just give you a rate, but not explain to you that it's probably based on a 30 day lock. It's doesn't matter if you are shopping for a mortgage or decided to go with that loan officer.
You see loan officers that give a low rate without asking you important questions. They just want to be the lowest so you choose them. And the best rate won't always equate to a smooth or ethical loan closing. And once you do apply with them, some won't explain in detail about the importance of locking or floating your rate. You just assume and they wait until it comes up in conversation.
The Value of Money
This will be talked about more in Part 4 of this series. But your loan officer should be asking you about your goals. There are many different ways to save money both in the mortgage payment or in closing costs. There are also ways to take that savings and invest it also.
This post is just a quick example of how you can lower your payment :
The Myths behind ZERO point mortgages instead of paying points upfront
My biggest Pet Peeve!!! - Good Faith Estimates
When you are shopping for a mortgage and that loan officer actually qualifies you?? Let's define qualifying you first.... someone that asks some important questions and someone that has actually pulled your credit report or has viewed a copy of your credit report. Well, after being qualified, that loan officer should offer you a Good Faith Estimate in the next 24 hours. And to be honest, if they truly qualified you, they should be sending it to you in the next 15 minutes. With today's technology, there is no excuse, unless their building just blew up. And a hint : even if they didn't qualify you and they gave you a rate over the phone, they should be sending you a Good Faith Estimate. And if you have to ask for it severak times and it takes days?... Red Flag Please read : Consumers need to be aware of these Red Flags
And in regards to Good Faith Estimates, please read : Good Faith Estimates and Good Faith Estimates.
Summary : Everything that I mentioned is to give you a better education of the process and what things that you should be most concerned about. Make sure that your loan officer brings each of these issues up and that they educate you on them.
All images from : istockphoto
Good Luck
The First Time Homebuyer Series :
Understanding if you should rent or buy :
- First Time Homebuyer Tips : FHA, a better mortgage program? -- Best Programs & Why -- Part 4 of 5
- First Time Homebuyer Tips : Summary - Red Flags to be aware of -- Part 5 of 5
Buying Tips :
- FHA 203-k Loans
- Asbestos and Your Health, Tips for Remodeling your Ann Arbor Home -- This post does talk about some specific places in Michigan, but in general, Missy Caulk gives us some great information on homes built prior to 1980 in regards to asbestos. This is a must read.
- FHA Loans - USDA Loans - Conventional Loans - VA Loans -
Experience & Knowledge at its BEST !!!
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For more information on FHA loans, please go to this link. : The FHA Expert
For more information on how you can obtain your dream home, please click here : Mortgage Financing Options
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags
Copyright © 2008 by Jeff Belonger
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