Best way to get a mortgage

My wife and I want to buy a house. I don’t want to get screwed in various ways over the mortgage. So what is the best way to go about this? Should I use my personal bank? Should I shop around, but still use a local bank? Should I look online? Are there places I should avoid (anecdotal evidence is fine)? I owned a house before, but the mortgage was done through a relative. He could do it again, but we would prefer to go the bank route this time (because he is getting old and might need his money). Any advice would be helpful.

IMHO I’d take a look at the big banks first

WAMU
BoFA ect ect.

I got mine through first horizon and it was just fine.

If you have the option, consider getting becoming a member of a credit union and get a mortgage through them.

Credit unions are good, another alternative is to try and get a referral for a good mortgage broker or two, from co-workers. They will shop around for you, and find you the best deal. They will, obviously add a little on top for themselves, but you can play them off against each other and bargain them down. Previous personal experience is that brokers working for large reputable firms will be better than self-employed types, who sometimes do not give the best advice.

You can also work with a mortgage broker/banker, which is cool because the idea is that if there is a delay or problem with your loan funding in time for closing, a mortgage banker can fund the loan themselves, then sell the loan off later.

Uh, search for wamu mortgage nightmare stories before you use them for anything. Thoght they will likely buy your mortgage anyways later from whoever you get it from and then mis-administer it to hell.

I used Lendingtree.com for my refi, and I thought it worked great. It’s easy to whip up a simple spreadsheet that lets you compare disparate loan terms and figure out which is the best for you depending on how long you plan to own the mortgage. The only catch is that you need to keep the info for the best 3-4 loans, because sometimes you call the best one and there are all these hidden charges that suddenly make it not even close to the best one – so you need to be ready to hang up and call #2.

get both of your fico scores up at all costs. go to the libary or bookstore and look through a suze orman book if you don’t know how.

That’s what we did, and have been quite happy. Find a solid credit union with people you can trust, with knowledge employees who can find you a good mortgage and spell the details and pitfalls out for you. Big banks are best avoided IMHO, as their only purpose is to make money off you.

First, I second the FICO scores, and that’s for both of you, because whoever is lowest wins. Nice, huh? Showing savings (“nested” money) is a plus. You’ll want to spend 6 months(more, if it has some issues) fiddling with your credit report. As long as you resolve any problems on it, you can get letters from whoever to give to your lender. If your FICO is in the mid-upper 600’s, you’re ok. If it’s better, then it’s better for you.

Definitely talk to your bank. In some ways, buying a house is easier than buying a car. Definitely^2 talk to other banks/mortgage brokers. Anybody around you owns a house has used somebody, tap them for info/referrals. You got to get these dudes to compete for your business. You’re gonna get the same initial finance rate as anyone else, it’s what comes after that is what is important. Your rate will increase if your lender has to do some “creative bookkeeping” to get you approved, ie if you lack nested savings or employment at the same job for several years, your FICO, your debt-income ratio, these things add half a percent or so for each. You can reduce it by barfing up a phat down payment, but a down payment is not necessarily mandatory. Closing costs are, but those run around $5,000-$15,000, depending on the purchase price of your house and how you classify what closing costs actually are. More on that in a sec.

Lenders can make money off you on either end of the deal, so competing lenders will sacrifice front end money (usuallly, because it’s easier) or they may not have the power to do so (a lot of the front-end money is for fees and such, fixed things set by the lender or county or state. Some lenders charge less for the same thing), thus fall out of the running. Get a book on buying a house, seriously. You’re gonna want to know what everything on your good-faith estimate (which every potential lender will give you as an offer) means, because that’s where your final decision rests.

If you buy new, you don’t really need a realtor. Any money you pay towards upgrades (usually 50% of the total upgrade cost, except in some cases flooring) will apply towards closing costs. Any money you pay out, period, can/will. Also, ignore the prices the builders put out as a monthly mortgage, or add a cool $300-400/month easy. Sure, you mortgage payment is that, but you have associated monthly fees in addition (all lumped in with your mortgage payment).

If you go re-sale, a realtor will reduce your headaches. You just gotta deal with the seller. It’s a pisser, dealing with people selling their house, and their queerball realtor. Get somebody you trust.

The major pros and cons between new or resale are: you get more house, typically, with resale, plus it’s easier to get mature landscaping and stuff like pools. You can get a pool added into your mortgage (I did), but it will count big towards your total purchase price, and lots of lenders use that as the barometer for what you can be approved for. Buying a pool otherwise is a money sink, they don’t add much to the house unless they’re put in with the house and sold in 5 years or less. So, you get them easy in resales. It’s easier to cough up dough for a new home, as there are several steps over the course of more than a few months requiring money (whatever is left you owe towards closing costs isn’t due until you sign on the dotted line, just days before you can move in). The Intent to Buy fee, then structural upgrades, then accessory/electronic upgrades, then the pool deposit, then finally closing costs and/or any down. Resales, the money is required at a faster pace, but many times the seller will pay your closing costs for you, just to get the fucker sold. So, it may actually not be more money paid out in total.

And, like mentioned, prepare to re-fi in like a year or so, and knock your monthly nut down.

My credit union said they used the average of the two scores, not the lowest of the two. Obviously, that can vary from lender to lender.

Depending on your plans (only going to be in the house for 3-5 years vs. planning on living there 10+), you can get different kinds of mortgages. If you end up with a long term fixed rate, you won’t be looking to re-fi anytime soon, because rates are more likely to trend up than down. You can do all kinds of monkeying around such that re-fis make sense down the road, but hey.

Lenders will tell you how many of their loans they sold in the past <timeframe>, if you care about the chances of the mortage being sold (to a WAMU, for example). It won’t impact your monthly payments at all, aside from where you send them.

I have had excellent experiences with Nexstar (www.nexstar.com) (I ended up there through my broker, but they do direct lending), who exist mostly online so there’s generally less in the way of fees/closing costs.

My first house I just went through the bank I had my checking account with. I later re-fied with Countrywide. No real complaints either way, aside from my original bank taking too much in escrow each month, ending up paying me once a year like a tax return.

My second house, the purchase loan was through Quicken Loans, who will almost certainly sell the loan within 6 months. I didn’t really care about that, but it ended up with Countrywide (again). I re-fied with Nexstar, who were very flexible on fees (I didn’t need to pay a quarter point to avoid escrow, I didn’t need to fork out $500 for an appraisal because I was still under 80:20 LTV), and didn’t require a pound of paperwork (I faxed them W-2s). I re-fied with them again and it was even easier.

It really is a matter of an assload of legwork, getting as many offers from as many places as you can stand, and then lining up all the terms/closing costs/fees and going with the best one.

Why not just put the mortgage in one person’s name them? My wife had been the victem of credit card fraud, and her credit was shit, so we just used my credit.

I don’t think you can do that. If you tell them you are married (and they will ask) they will automatically want to judge your spouse’s creditworthiness as well on the assumption that if she is dragging you down financially you might be less able to pay. If you lie and tell them you are single then they can do bad things to you later if the lie is exposed.

Wow, great info. Thanks. I have never checked my FICO (or heard the acronym, or at least recognized it). I checked, but it isn’t on an 850 scale, possibly because I checked through Transunion. They use a 925 scale. Anyway, my fico seems to be high, and the only way I can raise it according to the report is to live longer, since the only problems are that my accounts haven’t been opened long enough.

You can get that stuff fixed, can’t you?

If you catch it soon enough. My wife was an exchange student from Russia at the time, and it happened right after she returned back to Russia. It was more than two years before she came back, and by then too late. Whoever did it knew just who to target.

Collection agencies kept trying to squeeze money out of her, but a visit to the lawyer settled that (they couldn’t prove any of the debt). Unfortunately by then the information had already spread to a myriad places, and the credit system as a whole (at least in the US) doesn’t have a way to fix such errors. Eventually the bad record goes away I’m told, and I guess then you can rebuild credit from scratch. Fortunately my credit has been good enough to get by.

I’d second finding a trusted broker, possibly 2 or 3 of them. The brokers I talked to for my recent house purchase just buried what my bank offered, in terms of interests rates and closing costs. That said, make sure that

  1. … you get more than one of them. It’s amazing how quickly their best deal changes when they have competition or even know they have competition.

  2. … have one you trust. The wife and I made the wrong decision on the latter and the broker we choose made our life a pain even though the eventual deal we got was about as good as humanly possible.

if you’re looking for a house I’d strongly use an exclusive buyer broker. An agent that deals only with finding properties… They will have a number of very good contacts to look in to getting good/low rates. Many of their contacts will also provide other misc services such as working with you in fixing possible credit mistakes/problems.

Many standard real estate brokers are looking to make a sale more so then their clients best wishes… (hence why you’re doing this on your own right now.)

Second the credit union. You won’t get the best rates, but you won’t get screwed either; they’re not in business to screw their members.

But whoever you get a mortgage from, it will certainly be sold to one of the huge aggregators as soon as it is issued, so you will wind up sending your payments to Countrywide or Banc Oklahoma or someone like that. These mortgage purchasers are for the most part reputable and reasonably easy to deal with (in my experience of 3 mortgages) so the sale of your mortgage shouldn’t be too distressing in itself.

Advice: Compare the increased payments for no-points loans to the up-front costs of a loan with points. For my last loan, it would have taken something like 10 years to account for the points in reduced monthly payments, so it made vastly more sense for me to choose a no-points loan.

Don’t forget to check with your state housing authority, you can usually get rates 1/2-1 percent lower than the going rate.

There are disadvantages such as you can’t rent the place out, it has to be used as your primary residence and there is a recapture tax if you have a gain on the property, make more than 70k or so and sell in less than five years but if you meet the requirements and plan on staying that long it’s quite a bit of savings.

I’m going no-points, and I think I will use variable interest. We found a house we really like, but it’s out from the city a bit and not the house we want to spend the rest of our lives in. Most likely, we will move in 5-7 years, so I will probably go with a 7 year fixed, then variable rate loan, which will save me about .3-.4 %. The advice here has really helped, so thanks.