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What is the best way to "shop" for a mortgage?


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First timer seeking advice on how to get the best deal. Is it advisable to apply for pre-approval with a broker, a direct lender, and one other at the same time to compare? Or is that the worst thing to do?? Mid score will be between 580-600, so it's not the best scenario, and I don't want to get screwed or take the first offer I get. What should I do?? Please advise!

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If you are ready to buy, then a few inquiries dated around the same time for the same purpose(mortgage) isn't going to pose much significance on your scores.

 

I, as many others will attest, advise on not doing an on-line (e-loans, etc) pre-qual. Go see a few local lenders or brokers. With two or three local companies you will be able to get a good deal and an appropriate mortgage for your needs. Also, with a personal face-to-face approach, you will likely get quoted better rates and less fees. We often beat the big mortgage companies online GFEs by using their exact products and selling them the servicing rights. Tell your lender or broker you are shopping and want the best deal they can offer.

 

Don't let lower scores make you think that you have to pay a higher origination or extra high fees.

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Thank you credit007! I have a few brokers I met here that I will give a try, and I think I will call a mortgage co. in my area as well.

 

Can you or anyone else tell me what to expect after they pull the credit scores?? We don't have a house in mind, as we are still looking for the perfect one. Do we just tell them about how much we want to spend and then they will give a GFE or does that come after we find a house??

 

TIA!

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After your credit is analyzed, you will have to submit verifying docs to substantiate your income, obligations, etc. You will then receive any conditions from the underwriter that may have to be met prior to closing. A good LO will be on top of most issues after your application. Then you will most likely get a pre-approval letter listing the amount you have qualified for. You will receive your GFE at the time of your application (or within 3 days). Make note of the interest rate, term and type of loan, loan amount, closing costs etc. Remember a GFE is an estimate.

 

Once you find a property, your LO will want a copy of the contract. I always give a new GFE once I have a REPC, but some LOs don't.

 

Your quoted interest rate should be a fair market rate at the time of your application but some lenders give you a high rate on their GFE to protect your qualification if its tight, others will lowball the GFE rate with something unreachable just to get your business. Your rate isn't guaranteed until you lock it. Post your GFE here after and we will give some opinions.

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IMO you are shopping to early if your purchase is contingent on the sale of your current home because you'll probably have to put down a binder amount to lock your rate out farther than 60 days. Which (most likely) will be non-refundable if you do not close with that lender. If your house does not sell, you're out that money and any binder money tied to the seller's contingency.

 

Plus they'll have to repull your credit after 120 days so everything could change anyway. I guess you could still get an idea about what your rates are at the current time if you're curious.

 

You have to give them a financing (and any downpayment) amount so they can run the numbers for the GFE. Then you fill out a loan app if you like what you see. They'll then pull your credit, and give you your mortgage program options and what you do or do not qualify for.

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IMO you are shopping to early if your purchase is contingent on the sale of your current home because you'll probably have to put down a binder amount to lock your rate out farther than 60 days. Which (most likely) will be non-refundable if you do not close with that lender.  If your house does not sell, you're out that money and any binder money tied to the seller's contingency.

 

Plus they'll have to repull your credit after 120 days so everything could change anyway.  I guess you could still get an idea about what your rates are at the current time if you're curious.

 

You have to give them a financing (and any downpayment) amount so they can run the numbers for the GFE.  Then you fill out a loan app if you like what you see.  They'll then pull your credit, and give you your mortgage program options and what you do or do not qualify for.

 

ACF,

This process your describing, is this the formal "pre-approval process"? Or are these just first steps to take in the mortgage process? If not, should the OP still seek pre-approval at this point? Or hold off until he finds a prop that he likes? Sorry, I'm still a little (maybe a lot) confused :good:

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You will receive your GFE at the time of your application (or within 3 days). 

 

When shopping, knowing his scores, he'd ideally want all his GFE's before applying and having credit pulled, no? This way, he could get closing costs info, etc. up front.

 

He or she will not know what his scores truely are until his credit is pulled. He would have to apply in order for the lender or broker to get a complete financial picture. Yes, you can state your scores to other lenders to get a GFE. You can state whatever he wants, but without verification all deals are off. Yes, get your GFEs prior to shopping for a home (I think that is what you are asking?).

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OP here...

We currently rent, so we don't have to worry about selling a home and a contingency or any of that. I appreciate all the advice given here. I just wanted some direction on what steps to take and when and what to expect from the whole process. So if I'm understanding correctly:

 

I go to a mortgage broker(s) have them pull the scores and provide them any other documentation they need to get a pre-approval. This could take up to 3 days. At this point they should give me a GFE. Now, will the GFE have an interest rate? For example, if I'm doing an 80-20 will they provide what rates I qualify for at this point, or is that later in the process? At this point they will let me know how much of a loan I qualify for, right?

 

Then, with that information and a pre-approval letter I can really hone in on a house and put an offer in with confidence, right? So after a purchase price is accepted, a contract will be made by the seller and I take that to the broker who offered the best rate, etc. Is that when it goes to underwriting? How long until you close on a house in general?

 

Did I miss anything?? Thanks so much!!

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You will receive your GFE at the time of your application (or within 3 days). 

 

When shopping, knowing his scores, he'd ideally want all his GFE's before applying and having credit pulled, no? This way, he could get closing costs info, etc. up front.

 

He or she will not know what his scores truely are until his credit is pulled. He would have to apply in order for the lender or broker to get a complete financial picture. Yes, you can state your scores to other lenders to get a GFE. You can state whatever he wants, but without verification all deals are off. Yes, get your GFEs prior to shopping for a home (I think that is what you are asking?).

 

Since he (assuming a guy here :swoon:) stated his scores above, I assumed he already pulled them himself. Therefore, he can get pretty accurate GFE's from various lenders/brokers before applying and having them pulled again. Speeds up the shopping process. At least this is the way I approached it. I then took the plunge with one to get preapproved as the seller wanted it to begin building. I have not locked in yet because I won't be closing for 6 months or so and I would have to put down a 1% deposit to lock this far out which I don't get back if I don't close with that lender. I'm selling my house and if I don't sell or at least rent it out by then, all bets are off. So, once I at least get my house under contract, I'll test the waters again.

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From what I've been reading on the board, I think you and the seller agree on the timing of the close. Some may be looking to close immediately (ie they have already moved into new house and currently paying two mortgage payments), while others may be lloking to close six weeks or so later (ie they wanted a contract before looking for their new house). So I think that part is all negotiable.

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OP here...

We currently rent, so we don't have to worry about selling a home and a contingency or any of that.  I appreciate all the advice given here.  I just wanted some direction on what steps to take and when and what to expect from the whole process.  So if I'm understanding correctly:

 

I go to a mortgage broker(s) have them pull the scores and provide them any other documentation they need to get a pre-approval.  This could take up to 3 days.  At this point they should give me a GFE.  Now, will the GFE have an interest rate?  For example, if I'm doing an 80-20 will they provide what rates I qualify for at this point, or is that later in the process?  At this point they will let me know how much of a loan I qualify for, right?

 

Then, with that information and a pre-approval letter I can really hone in on a house and put an offer in with confidence, right?  So after a purchase price is accepted, a contract will be made by the seller and I take that to the broker who offered the best rate, etc.  Is that when it goes to underwriting?  How long until you close on a house in general?

 

Did I miss anything??  Thanks so much!!

 

Yes, the GFE's will have rates, terms, closing costs (fees), prepaid items (tax and insurance estimates), etc.

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Ok, I'm not the OP, but maybe you guys can review this and tell me what's good and bad here that I can really change as I shop around for a mortgage. This came from an online pre-qualification, where credit was pulled (BofA):

 

This is for the first mortgage of an 80/15/5 for a $700,000 purchase price.

 

Your requested mortgage: 7/1 ARM 30YR
View more rate and point options  
Select a lock period that corresponds to your estimated closing date. 

Select Your Rate 
Interest
Rate
Points APR Lock
Period Monthly
Payment Estimated
Closing Costs 

Get Pre-Approved
5.25 2.001 5.4388 60 $3,092.34 View 

Get Pre-Approved
5.5 1.083 5.4814 30 $3,179.62 View 

Get Pre-Approved
6.0 -0.031 5.7079 30 $3,357.48 View 

Get Pre-Approved
6.125 -0.228 5.7672 30 $3,402.62 View 



Your requested mortgage: 30 YEAR FIXED
View more rate and point options  
Select a lock period that corresponds to your estimated closing date. 

Select Your Rate 
Interest
Rate
Points APR Lock
Period Monthly
Payment Estimated
Closing Costs 

Get Pre-Approved
5.5 2.077 5.6888 30 $3,179.62 View 

Get Pre-Approved
5.75 0.938 5.8598 45 $3,268.01 View 

Get Pre-Approved
6.125 -0.037 6.2386 45 $3,402.62 View 

Get Pre-Approved
6.25 -0.181 6.3649 60 $3,448.02 View

 

 

For the 30-yr fixed, here's the GFE:

 

 
Amount Paid by Lender or on Behalf of Borrower - HUD Series 200   
 


Subtotal 
$0.00 



Items Payable in Connection with Loan - HUD Series 800   
 

HUD #801 Loan Origination Fee $5,600.00 
HUD #802 Loan Discount Fee ($347.20) 
HUD #808 Tax Service Fee $75.00 
HUD #811 Application Fee $400.00 
HUD #815 Flood Determination Fee $11.00 
HUD #876 Lender Closing Fee $719.00 

Subtotal 
$6,457.80 



Items to be Paid in Advance (Premiums) - HUD Series 900   
 

HUD #901 Prepaid Interest $1,323.30 
HUD #903 Hazard Insurance Premium $1,960.00 

Subtotal 
$3,283.30 



Reserves - Items Used for Escrow/Impound Reserves - HUD Series 1000   
 

HUD #1001 Hazard Insurance Reserves (1 mos) $163.33 
HUD #1002 MI Reserves $0.00 
HUD #1004 County Tax $3,645.85 

Subtotal 
$3,809.18 



Additional Title Charges - HUD Series 1100   
 

HUD #1101 Settlement/Closing Fee $1,050.00 
HUD #1101 Tie-In Funding Fee $200.00 
HUD #1105 Attorney Document Preparation Fee $100.00 
HUD #1106 Notary Fee $50.00 
HUD #1109 Lender's Title Insurance $753.76 
HUD #1113 Subordinate Escrow Fee $100.00 
HUD #1125 Courier Fee - Settlement Agent $50.00 

Subtotal 
$2,303.76 



Government Recording/Transfer Charges - HUD Series 1200   
 

HUD #1201 Recording Fee Deed $75.00 

Subtotal 
$75.00 



Other Settlement Charges - HUD Series 1300   
 


Subtotal 
$0.00 


Total Estimated Closing Costs $15,929.04

 

How much of this will change when I get true competetive quotes? I'm trying to slow myself down right now to save more money, so it will really help me with planning.

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HUD #876 Lender Closing Fee $719.00 and HUD #1101 Settlement/Closing Fee $1,050.00 look suspicious to me. :)

 

5.75% on a fixed 30 yr. with 1 pt. seems on par for good credit scores based on my own search and research I've done lately.

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What I did was put together a packet for prospective lenders and talk directly to the underwriter if I could. I printed out copies of my credit reports from Myfico.com. I also included Cashflow statements, Income statements, and a balance sheet. I additionally included proof of income(paystubs), proof of assets etc. I stuck this all together in a nice packet at Kinkos with tabs and bound in a nice little binder with page numbers and a table of contents. I made 10 copies, walked into 10 different local big branch lenders, and dropped it off. I made them sign confidentiality waviers as well as a "i will not run a credit check until you give me written authorization since I have a fresh copy right here. I got a bunch of real responses back. I let them know that, if they gave me a teaser rate and that if the loan comes back at a higher rate, I wouldn't work with them. Period. I ended up with a 5.5 NOTE, 5.53 APR, 30 yr fixed, with $200 in closing costs + appraisal etc. I made sure to get "truth in lending disclosures" and "good faith estimates" from all of them. Some of them were even helpful and told me that a different bank in town had better rates. I threw this all together in 2 days(10 hours of work!) But, I believe that it saved me a TON of money. There is no need to use a broker in these situations if you are willing to do a little work. You'll know you're getting the best deal in town. This is a bit of work, but it saves a lot of time and effort. BTW, they had all the docs they needed. All I had to do was sign a few docs when they ran my final credit check. It went so smooth and I even had a cosigner!

 

Hope that Helps,

SB

 

PS:

Loan Origination Fee $5,600.00

 

rediculously high from my perspective

Edited by bernsten69
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bernsten69:

 

could you detail what you put into your packet? also would love to see how you worded the agreement about pulling credit. DH & I will be mortgage shopping early next year and I think I would like to do something like this. DH & I are hoping to buy the house we currently rent so would include info on the house as well.

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