- Mortgage Application
Many home buyers go to the trouble of finding the best deal on a house; but fail to do their homework when comparing loans. Also, comparing lenders is not so easy because rates are changing very rapidly; so that the best deal today may not be the best deal tomorrow. Furthermore, there is much more to a loan than simply the interest rate. There are also many fees associated with getting a loan. Some lenders have a very low interest rate; but make up for it with higher fee structure. Others are the opposite.
Here are some pointers to help you navigate through this decision:
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Get started early - don’t wait until you’ve found a home to begin investigating lenders.
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Pick one day to call 2-3 lenders that you wish to comparison shop. Ask each for what is called a Good Faith Estimate (GFE). This is a standardized form that will show a complete breakdown of estimated fees and loan terms.
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Don’t just look at the bottom line - many of the fees are 3rd party fees and government taxes that will be the same no matter which lender you use. The fees that you want to consider most heavily are those in the first section of the GFE (lender fees). You can pretty much ignore the rest.
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Generally speaking, if you plan to be in the house for a shorter time or if you are cash poor and need all of your money to be applied to your down payment, then you are better off with a lower fee structure even if it means a slightly higher rate. If you are not cash poor and plan to stay in the home for a long time and don’t anticipate refinancing, then it may be better to get the lowest rate even if you have to pay more upfront.
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The lenders will want to pull your credit report. Consumers are often afraid to have that done because they fear that it will negatively impact their score to have it pulled many times. Firstly, although it is true that it can have a negative impact, the impact is so small that it is insignificant for most poeple and very rarely does that alone make the difference between qualifying or not. It’s a good idea to have it pulled at least once early on to identify any issues that might take time to work out. Also, there is a rule that multiple credit pulls done during a short window of time are not supposed to negatively impact your score at all. This was put in place to allow home buyers to shop for loans.
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Don’t forget about the customer service aspects. Your lender will play a significant role in how smooth your transaction goes. Your best option is to select a local lender that you can meet with face to face if necessary (Internet lending does add some difficulty) and who knows the local customs and laws for the state in which you are buying a home.
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Don’t drive youself crazy - while there will be some differences and it is worth shopping around, you are likely to find that the costs are going to be very close no matter who you go with.
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You should not generally have to pay an up front fee to lock your rate, etc. Be leary of anyone that asks you to do so and find out specifically why.
Tags: Home Buying, Home Loans, Lending Guidelines, Mortgage Rates
July 31st, 2009 at 6:04 pm
Some more tips would be great as real estate loans do change often. Plus more experiences are appreciated.
September 20th, 2009 at 11:53 pm
I found your blog on google and read a few of your other posts. I just added it to my News Reader. Look forward to reading more from you in the future.
October 29th, 2009 at 1:58 am
a fha loan is not taken out directly from the government. Instead, you borrow from a participating lender. As of the start of 2010, the FHA will institute new regulations designed to bring more, and more reliable lenders to the table.
January 18th, 2010 at 12:04 pm
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June 28th, 2010 at 1:57 am
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