Mortgage Advice
When considering options for mortgages, it's not just about what lenders to talk to. Below I go over some of those details.
Shop Around for Mortgages & Get Educated on What You're Looking At Before Looking at Homes
I recommend getting rate quotes from multiple lenders, but keep in mind that the details of rate sheets are very important. A lower cost is about more than just lower interest rate, such as the cost of mortgage insurance for conventional buyers putting less than 20% down and FHA buyers. Adam has seen where lenders have purposely excluded certain costs in order to appear lower than other options. Also, be sure to ask lenders if the quote that they are giving includes taxes, insurance, and points that would buy down the rate. It is best to get pre-approved prior to the home search. Not all lenders have the same programs available.
When Shopping Around, Get All Rate Quotes on the Same Day
While locating lenders that you want to rate shop for can occur over a long time span, it is best to do all rate quotes on the same day, with rate sheets that you can show to competing lenders to see if anything was left out. That way, the overall market rates are the most similar, which is more of an apples to apples method than allowing time to pass between quotes. That will also help to minimize credit impact, although with that, it should not matter so much with it being the same day as long as it's within a 7-14 day time span.
Get Lenders to Compete
Also when comparing rates of different companies, especially if you like the personality or other non-numerical qualities of a lender but the rates of another are better, ask them if they can match or beat the numbers so that you can still get the person you feel more comfortable with.
30 Yr vs 15 Yr Loans
While there are other loan periods possible, the most common loan terms are 15 year and 30 year loans. With a 30 yr loan, you'll typically be paying more interest than principal starting off, while with a 15 yr loan, you'll typically be paying more principal than interest starting off. Most buyers opt for the 30 yr route because it's more difficult to afford the payments on a 30 yr home for the kind of house that they want. Interest rates on 15 yr loans are lower than those for 30 yr loans. One option is to buy originally at a 30 yr rate, then refinance to a 15 yr rate once your income has increased and when rates have gotten lower. That is what I did on my first home. That said, in some cases, the going rates will go up between when you purchase and when you are ready for a refinance.
Questions to Ask Lenders
I also recommend that you ask each lender you interview the following questions:
1. What percentage of your loans close on time?
2. How long do you typically need to close on a mortgage loan from the time of the contract?
3. Are there any programs that you can think of that can help reduce my home cost?
4. Are you ever able to match rates if another lender has lower rates or a closing cost rebate? What about the 1% closing cost rebate that a company is offering me (after you've asked Adam the name of the company first that he doesn't like to publish that gives 1% CCA rebates for his referrals & gotten rate quotes from that company)?
5. Do you work on Saturdays and after 5 PM? Do you have certain hours? What is your time zone if it's not Eastern? If there are days or times that you don't respond to calls, do you ever make exceptions and if so, for what sort of reasons? 6. What percentage of loans does your bank service/hold in the long run out of those that you initiate? 7. Do you text?
Helpful Resources
Especially if the lenders you are reaching out to won't give you rate sheets prior to you getting under contract with a home, be sure to look at some of the online tools available so that you know what you are getting into before getting into a contract on a home. See my Helpful Online Calculators page to assist with that, including the amortization table.
For more tips on mortgages, go to my mortgages and financing page which goes over some of the loan type differences and otherwise.