Where should I begin?
Probably the most important, overlooked
aspect for you if you're considering a home is obtaining the right
mortgage financing up front. Nothing makes you feel better, than
to be able to talk to anyone about purchasing your next home already
knowing that you're already approved for your mortgage. In
addition, it gives you great piece of mind already knowing that no one
can turn you down, and that you've got the best interest rate and terms.
There's no debating that getting preapproved is definitely a smart move.
Local Lenders vs National Lenders - Choose
A Reputable Lender with a Proven Track Record
The single best way to begin interviewing
lenders is 1) consult with your real estate agent to gain insider
knowledge on which lenders currently offer the best rates and terms and
2) consult with friends, coworkers, and family to see if they've worked
with anyone recently who offered truly outstanding service and products.
No matter who your friends, family, and coworkers might say, ensure you
talk with your agent before making any final decisions because this is
who you're forcing your agent to work with. Local lenders are
usually your most reliable source of mortgage information affecting the
community where your future property will be located, so attempt to
locate a local lender first. Remember, if you and your agent can't
speak directly with someone who intimately knows your circumstances and
knows you by name to solve problems for you when they arise, you're
setting yourself up for failure.
Tip From the Front Lines:
Use a Local Lender if at All Possible.
Traditional Lenders vs Mortgage Brokers -
Which One Should I Use?
Traditional lenders in the area where
you'll be purchasing are your most reliable choice. You may find
that they include banks, national franchises, savings and loans, etc.
While they may not have as many different programs as a mortgage broker,
they often have more affordable rates and terms, and may charge fewer
fees than some of your other choices. They're usually your best
bet if you have don't need creative financing, and have good to
excellent credit. Some traditional lenders service and keep their
own loans, which affords them the opportunity to provide local service
for your mortgage financing, and offer more flexible loan terms or
qualifying. Most, however, sell their loans to other lenders or
institutions on the secondary market after your loan is closed so that
they can continue to make mortgage loans in the future.
Mortgage brokers are truly in a world of
their own. Their reliability, similar to other lenders, is solely
based on the strength of their company. In many situations, they
can find lower cost loans if you're willing to do the homework with them
and you're patient. They are traditionally not limited to only one
loan source. Instead, they usually have a variety of loan sources
to choose from and can help you choose from a broad variety of loan
programs that might better suit your needs. In our experience,
their loan fees or "closing costs" are a bit higher, but they can
usually help obtain loans for those below average credit or those who
need special/creative financing.
Tip From the Front: Try a traditional
lender first, then interview mortgage brokers if your traditional lender
doesn't meet your needs.
Choosing Your Loan Product:
Conventional, FHA, or VA - Which Loan Type Would Be Best for Me?
Conventional loans are those loans that
are not obtained through a government insured program. This is
your basic loan and is probably the most common. Conventional
loans have a broad variety of program types and are often used in
conjunction with special situations such as One Time Close loans for new
construction, "Bridge" loans, etc.
FHA loans are a viable alternative for
those who may not qualify for conventional loans or those who wish to
have a minimum down payment. The current FHA down payment is
usually around 3% of the loan. You'll want to be careful when
choosing this is a loan option, as you may have to pay higher closing
costs and you also may be subject to a higher payment amount if you have
a down payment of less than 20%. It can be a viable alternative -
you just need to consult with your lender and ensure you understand your
anticipated closing costs and payment amounts before you agree to
anything in writing.
VA loans are loans that are government
insured, and available to former or active members of our nation's
military. Not everyone qualifies for VA loans, as there are
special entitlements offered to our veterans - not for the general
public. This is a powerful asset to have if you're a veteran, as
there is currently no down payment required to obtain a loan through the
VA. There are special closing costs, such as the Veteran's Funding
Fee that need to be considered before choosing this loan option,
however, VA interest rates are usually very low, they have more liberal
qualifying measures, and they're a very strong loan in the eyes of most
sellers and borrowers. There ARE ways to use your loan more than
once at a time, so please email us or your lender to determine if this
program is right for you. I would recommend contacting us first, as many
lenders are not experienced enough with VA loans to offer you all the
options. If you decide this may be right for you, you'll want to
choose a special lender who writes a majority of their business through
VA so that you work with the experts - not a novice.
Tip from the Front: Consult with your
agent prior to talking with your lender, and go through the mortgage
selection process together - not on your own.
Choosing Your Loan Product:
Adjustable Rate Mortgages (ARMs) or Fixed Rate Mortgages (FRMs)
When it comes to ARMs, can we just learn
to say no? Adjustable Rate Mortgages are usually not in the best
interest of the buyer unless purchasing a property right now, against
all other odds, is the most important priority. For those of you
not familiar with ARMs, they're loans with fixed, lower interest rates
up front for a certain number of years, then the rate changes on an
annual/periodic basis in accordance with a key economic indicator.
For example, a 3/1 ARM may have a fixed interest rate that increases
slightly over first 3 years of the loan on an annual basis, then the
door is wide open for the rate to change significantly based on the
indicator. For 5/1 ARMs, it changes at a guaranteed rate (but
almost always upward) for the first 5 years, then it goes haywire.
If you haven't refinanced your loan with that 3 or 5 year window, you're
leaving yourself wide open for significant increases in your payments.
We've had lenders tell our buyers "Well,
you can just refinance into a fixed rate mortgage in a couple of years
when your credit gets better." As if. What they don't tell
you is that it'll cost you another round of closing costs to refinance
and that it's going to be expensive. Many cannot afford to
refinance or their income situation changes and they no longer qualify
to refinance. If you'll pay attention to what's going on right now
in the mortgage markets, you'll notice that we've got a
significant increase in foreclosures nationwide. Part of that
problem is due to the fact that interest rates increased over the past 2
years and now those hard working home buyers who financed with ARMs are
being charged significantly a significantly higher interest rate because
of it. Hence, many homeowners can no longer afford to keep their
homes or keep up with their payments.
Fixed Rate Mortgages (FRMs), on the other
hand, always have the same interest rate throughout the life of the
loan. They're a much better choice for home buyers and they're
usually available to those with average to excellent credit. If
you can't get a fixed-rate mortgage, you might reconsider purchasing a
home at this time. You can always wait, clean up your credit, get
a second job, or do a number of other things that will help you get a
fixed-rate loan. We recommend doing exactly that. That way,
you can help ensure that your interest rate stays constant throughout
the life of your loan. It's usually in your best interest (no pun
intended).
Tip from the Front: Obtain a fixed-rate
mortgage up front unless you can clearly define how an adjustable rate
mortgage will be in your best interest.
Obtaining Your Good Faith Estimate for
Anticipated Closing Costs
You should ALWAYS get a Good Faith
Estimate of Closing Costs (GFE) from your potential lender before 1)
choosing your lender 2) paying for anything related to the loan
and 3) filing your loan application. The GFE is just that - an estimate
of your anticipated closing costs. It's not exact, but it's often
the best indication of fees charged by your lender. The reason it
won't be exact is because there are estimates of closing-related charges
that are out of the lender's control, such as which closing/settlement
company you'll use, survey costs, etc. A reputable lender should
give you a copy of the GFE up front - BEFORE you file your loan
application. In fact, we require our lenders to provide them up
front, while we're "shopping" lenders. If your lender can't do
that for you, choose another lender. Lenders must provide a
copy of your GFE within 3 business days of filing your loan application.
Our recommendation? Get it up front.
So we know that it's not a guarantee, and
that it's merely an estimate. What can you do to help guarantee
your closing costs? Ask your loan officer to guarantee the GFE in
writing. If they won't do it, find someone else who will stand
behind their product and find another lender. You'll be able to
quickly determine the difference between a professional and a novice
just by asking for this one document up front. Second, ask to
receive a HUD-1, or "Settlement Statement" at least 24 hour prior to
your closing appointment. If your closing costs weren't accurate
and the situation cannot be resolved, go with another lender.
Lastly, bring your Good Faith Estimate with to you closing so that you
can compare the differences between the estimations on the GFE and
current, real world charges.
Tip from the Front: If your loan officer
can't guarantee a Good Faith Estimate and provide that for you before
filing your loan application, choose a better loan officer/lender.
Prequalification vs Preapproval
Prequalification essentially means that
you've already talked with a lender, you've submitted your information
so that the lender can verify your credit report, and that the lender
has successfully "qualified" you for a new loan based on the information
you've given them. "Qualifying" and being "Preapproved" are
literally two different things. It's expected that you're at least
prequalified before you submit offers for purchasing property, and
serious sellers normally would not accept an offer from a potential
buyer if they're not at least prequalified - it shows that you have no
current relationship with a lender, and it tells the seller that there's
a great risk in accepting a contract from you because you're not quite
ready. Prequalifying is easy, and normally doesn't take more than
20 minutes on the phone with your lender of choice. If it takes
longer, find another lender - they don't have time to work with you.
We've talked with people who informed us that it took days or sometimes
even weeks to get a prequalification letter from their lender.
What we've discovered is that you usually get the same level of service
throughout the transaction - meaning it was a bad decision to choose
that lender if they're not fast, adaptive, and flexible enough to work
with you. You should definitely get prequalified before scheduling homes
to view for purchase.
In the best of all worlds, you've
contacted your agent, selected a lender of choice, and taken the extra
measure of getting preapproved prior to viewing homes in your target
area. You really wouldn't believe how much easier it makes the
entire process of home purchasing for you, and it leaves you free to
truly select the right home without undue stress. Preapproval is
the logical step one would take prior to making the decision to purchase
a home. Without talking with your lender first, how do you really
know if 1) the right mortgage product is available to suit your current
conditions 2) what true interest rate you can really obtain and 3) what
your final payments and anticipated closing costs will be? For
example, one of the terms of most Texas purchase contracts will be how
much of your closing costs you'll ask the seller to pay, if any.
How will you know how much to ask for if you don't truly know what your
closing costs will really be?
Tip from the Front: Get preapproved
before you physically view your first property.
To Lock, or Not to Lock
Loan terms and rates literally change by
the hour. You may have something in writing from your lender, but
those terms and rates are the rates available at that particular
point in time. They're not good indefinitely. Keep in
touch with your lender as you go through contracting your new home, to
ensure you're aware of what the current rates and terms are. In
fact, loan rates and terms can often influence when you purchase
in very volatile loan markets. For example, if you expect interest
rates to rise dramatically in the next few days, you may want to go
ahead and contract your home now and "lock" your loan before interest
rates rise. On the flip side, you may want to hold off for a bit
if you or your lender expect interest rates to fall during your
contracted period. Whatever your particular case might be, ensure
you're aware of rates provided through your lender on a regular basis so
that you don't get caught in a bad situation. Remember when we
talked about reliability and service near the top of the page?
This is what we mean. A reliable, proactive lender will contact
you to ask you if you want to lock-in your rate prior to anticipated
rate changes so that your risk is reduced. Better to work with
someone that you or your agent knows rather than dealing with someone
who's untested. If they have to face you later, they'll probably
do a better job for you. If they're in Milwaukee and you're in San
Antonio, they're not going to be worried about you. In reality,
many people really don't know to ask their lender to keep them informed.
And you know what? They shouldn't have to! A professional
lender should do this for you without having to be asked.
Tip from the Front: Choose a proactive
lender and lock when the terms and interest rates suit you best.
Get your lock in writing, so that you understand the terms and rates.
Ask Your Loan Officer to Attend Closing
At closing, you'll want 3 people to attend
- 1) your real estate broker/agent 2) your title officer and 3) your
loan officer. That's right, your loan officer. The loan
officers we recommend almost always attend closing - in person.
The loan officers most of our clients select on their own - DO NOT
attend closing. It's probably not because they don't care.
It's simply that they don't care enough to attend and they don't think
it's worth the time. Essentially, they're too busy to fuss with
your home purchase. Think about it. If someone is too busy
or uncaring to attend your closing, how much could they really have
cared about the entire purchase? Most likely, not much.
Tip from the front: Ask your loan
officer if they will attend your closing with you as a condition to
filing a loan application with them. Insist on excellence.
Insist on the best.
You've probably noticed by now that we
expect a great deal from our loan officers and lenders. No more
than we expect from ourselves. We insist on excellence and
tolerate nothing less. It's your money on the line and your
family's happiness at stake. Why would you accept anything less
than top-rate service? We take great pride in serving our clients
and excellence is our minimum standard. Don't you deserve the
best?
You can always write to
trey@corridorbrokers.com
or call us at (888) 743-1528 with your questions and we'll help find the
answers you need. For more tips you can read everyday, please feel
free to visit our real estate blog located at
http://www.texcenproperties.com/wordpress Good luck and we
look forward to serving your interests in the near future! |
Have a Mortgage Question? Take a Few
Seconds to Let us Know How We Can Help....
Choosing Your Agent
Ever wondered sometimes why purchasing
property seems to be so difficult? Who can you trust? Why
home should you buy? Which property is right for you?
Our experience has shown that it's usually
only made difficult if the right choices weren't made up front to reduce
your risk in the process.
Think about it. Most people approach
the process entirely in reverse...
1) Choose the right home
2) Choose the right financing
3) Choose the right agent
When it should look like this....
1) Choose the right agent
2) Choose the right financing
3) Choose the right home
The real estate agent's total function in
life is to smooth the road for you in advance. While it's not
always possible, this is the goal.
A reputable agent, like reputable
professionals in all other fields should anticipate problems, provide
solutions, solve problems, and stick by you throughout the entire
process. They're also responsible for consulting and advising you
to help you make the right decisions.
In our experience, we've found that most
of our buyers believe the most important function real estate agents are
responsible for is opening doors and showing homes.
While that's a very important part of what
we do, it's only a small part. That explains why you see many
potential buyers hiring their friends or acquaintances as their
agent....seemingly never understanding how important their level of
service, education, and experience might be. Agents are truly not
all the same and are as unique as each home might be during your pending
relocation.
Just like your future home, "there's only
one best one."
How often have you purchased homes and
taken the time to see each and every home that might fit your criteria,
only to find there are 3,000 that are all the same? Never.
Use the same criteria when selecting your
agent, and you'll never go wrong. Who specializes in representing
buyers? Are they specially trained to represent you? Are
they experts in the local area and do they really know what this home
should sell for? If they do, are the expert negotiators that can
really help you purchase this home at a price that's realistic?
What's the resale value of this home and how long will you have to own
it before you can at least break even? Which homes are better
investments?
Only a trained expert can really
accurately deliver information like this. Their ability has
nothing to do with who knows how, or how well you know this person.
Do referrals count? Absolutely, but
understand the credibility of the source of that referral before you
make your own decisions.
Then how should you make your decision?
If you're buying, try these....
1. Choose an agent who has hands-on
experience with the area and property type you're most interested in
2. Choose a Buyer's Agent who holds the
Accredited Buyer's Representative Designation (ABR). Visit
REBAC.net to see who's ABR-designated through the Real Estate Buyer's
Agent Council.
3. Choose your agent based on
education. If you were interviewing employees, you'd certainly ask
about their education level and special accreditations, so don't forget
to do it when interviewing your agent as well.
4. Does your agent take the time to
educate you and the general public prior to working with you?
5. Does your agent have a fully functional
website that enables you to search properties in the local multiple
listing service online? How much could a Buyer's Agent care about
what they do for a living if they can't provide you with the tools you
need to be able to see each and every home for yourself prior to a
showing?
6. Is your agent available? If your
agent takes too long to respond to individual inquiries, perhaps it
might be best to choose someone who has more time to accommodate your
schedule.
7. Will your agent attend closing with
you? We've already covered this, but yes, this is a mandatory item
that shouldn't be overlooked. You'll want them there at closing.
8. Will your agent be there after
the sale? No matter how valuable our services might be during your
purchase, they're even more valuable after the sale.
Take the time to
email or call us today at (888) 743-1528 to let us know how we
may be of service. We' sincerely appreciate your referrals! |
