Having been in the mortgage business for almost 11 years, I have to say that I would hate to have to shop for a mortgage. There are so many programs and so many lenders that it's impossible to know if you are getting the best loan at the best price.
My advice to anyone in the market for a mortgage is to check with your friends and family to see who they used or would recommend. It's also good to check with your Realtor, but get more than one recommendation. It doesn't hurt to be somewhat aware of where interest rates are at this time, too. But also be aware that rates differ from program to program and can be higher due to past credit issues or little or no downpayment.
Occasionally, I will do a rate shop myself. I like to see how I compare to other lenders in my area. (my rates are usually the best...that's a little brag) Sadly, many loan officers don't give good factual information. I have had a rate quoted that was at least a quarter percent lower than my best available rate, and yet the closing costs quoted were nearly identical to mine. When I questioned the loan officer as to whether there was a broker fee or lender fee, he disclosed that it did require a 2% broker fee. Well folks, a 2% broker fee is considered a closing cost and should have been included. How many rate shoppers have fallen for that line?
Another important thing to keep in mind when getting mortgage rates is what type of loan do you need. Many times I have had clients call for a rate for a 30 year fixed mortgage. Thank goodness I ask questions or I would have angered some people in the past. If you are doing a traditional 30 year fixed conventional mortgage with a downpayment of at least 5% and you have good credit, then you would most likely be the easiest person to answer with a rate. However, if your credit is less than perfect, you don't have anything for downpayment, you are buying the property as an investment property (rental), or you are looking for a NO PMI loan (no mortgage insurance - PMI is required on most loans with less than 20% down), you are a veteran wishing to use your VA eligibility, or you require an FHA loan, you will have a rate other than the the traditional 30 year fixed conventional rate. This is why I say that you need to seek out someone you can trust. Someone that knows the programs and will give you an honest and fair rate for your mortgage. Someone that was referred to you usually wants to maintain that relationship with the person that sent you. They will most often do their best for you.
Okay, now lets say you are the borrower with good credit and a downpayment and you are looking for a 30 year fixed rate conventional mortgage. How do you shop? Well...again, start with the referrals, but it's okay to call lenders and ask their rate. But preface that by telling them something about yourself and your goal. Tell them the price or value of the property. Tell them whether it's a purchase or refinance. Tell them what cash you have available for downpayment and what your mortgage amount would be. Then, ask them for the rate. Also ask for the amount of closing costs NOT INCLUDING TITLE INSURANCE. The reason to leave out the title insurance from the closing costs is that many lenders do not calculate it correctly. You may find that through your shopping there are two lenders with the same rate, however one quoted you far less in closing costs. Then, when you get to your closing, you find that the title insurance that he quoted was far less than the actual price. You may have actually done better with the other lender. After you are quoted a rate and closing costs (without title insurance) ask if there is an "origination fee", "broker fee", "lender fee", or any points (a point is 1% of your mortgage). Technically, these should all have been disclosed as closing costs, but some lenders like to mislead people.
Keep in mind that after you have gotten a quote for a rate and closing costs (without title insurance) that are attractive to you, there will be other costs. Title insurance (of course), your first year of homeowner's insurance, prepaid interest, and funds for the escrow account. However, all of these items will be the same regardless of lender, but it's still good to be aware of them. You can get a quote on title insurance from the title company that will be providing your title insurance. You obtain homeowner's insurance through an agent of your choice and this is not dictated by the lender. Escrows are federally regulated. The escrows, prepaid interest, your first year homeowner's insurance are all considered "pre-paids".
My final suggestion is that once you are decided on a lender, ask for a Good Faith Estimate. This is where they spell out all the closing costs, the prepaids and what your actual mortgage payment will be.
Feel free to email me with any questions that you may have at jimburrington@aol.com . Remember also that I (and my company) are licensed to do business in Ohio, Michigan, Indiana, & Kentucky. I would be happy to assist you, too!
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