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MORTGAGE INFORMATION

Being pre-approved for a mortgage is a must in today's market and the smart home buyer will get their financial house in order before looking for a home.  Regardless of what you offer any particular seller for their home, lowball or otherwise, you still need to prove to them that, should they agree to engage your offer, you are financially able to do the deal.

While it's a good idea to shop around for a mortgage, don't hurt yourself doing it.  What I mean is this; there are a myriad of mortgage products out there and they are constantly changing. You could drive yourself crazy looking for the "best" deal and the "best" deal in the morning may not be the "best" deal later in the day.  Also, (unfortunately) even though you shop around, it can be very confusing trying to compare mortgage products.  You may find a company that has what appears to be the lowest interest rate, but they might have the highest closing costs, or you might find a company that has low or no closing costs but a higher interest rate.

Also, you probably won't be in your mortgage for the length of its term; few people are. Somewhere along the line you will either move or refinance due to changing economic factors or other reasons.

Here are a few tips and guidelines on shopping for a mortgage.

There are two basic players in the mortgage industry; mortgage brokers and mortgage bankers. Brokers sell other lenders products and typically do not service the loan after it closes.  Bankers typically sell their own products (although not always) and may also service the loan after it closes. Brokers, in theory, have access to mortgage products from a variety of sources and can help you shop for the best mortgage product that meets your needs.  Mortgage bankers are typically large lenders that have a variety of products available for you to choose from in house.  In my experience I have never seen a clear advantage of either a mortgage broker or mortgage banker.  Just like buying a home, each mortgage product needs to stand on its own merit.  You can find as good a “deal” with either a banker or a broker.

As an example of how this could be let me cite the following.  You could have a situation where a broker actually would incur more costs (and subsequently passes it on to you) for a mortgage product that you could get “cheaper” going directly to the banker that’s offering the mortgage product. In reverse, I’ve seen bankers charge more for a loan product to their own loan officers than they do to a broker selling the same loan. It all has to do with margins and fees one lender charges another.

There is generally not a concern as to who services the loan after closing, so don’t worry about this aspect.  Loans get bought and sold on the “secondary” market all the time. Another reason to not worry about it is that there’s nothing you can do about it should your original lender decide to sell the servicing rights to your loan.

While the mortgage company you choose is important, I've always felt that it's just as important whom you select as your mortgage loan officer.  The main reason is this, let's say you have 50 loan officers working for a large lender and that lender has 20 mortgage products.  One loan officer may be well versed in all 20 products while another may decide to concentrate on three or so – typically the easy most common products.  If, you are working with loan officer number two in my example, you may not even become aware of a product that would work well for you simply because the loan officer is also unaware due to his/her limiting their knowledge of there own product line.

As with many things in life, experience is very important when selecting a mortgage loan officer.  Which leads me to this, never let a rookie practice on you.

Also, if you have a relative or friend in the mortgage business (and who doesn't) contact them if you feel comfortable doing so. They may have the right mortgage product for you and hopefully they would be someone you can trust.  But, please do not do business with them just because they are a relative or friend.  Let them know right up front that you will be making a "business" decision with regard to where you get your mortgage. And be forewarned; be prepared for a possible straining of the relationship.  In these situations you are sometimes darned if you do and darned if you don't.

I won’t get into all the reasons here, but in most situations (remember there are always exceptions to the rule) I would steer clear of any mortgage loan other than a 15 or 30 year fixed. Mortgage lenders are always trying to come up with the latest, greatest mortgage product and most the time these products are marketed as good for the home buyer. However, quite often the products are created to increase the bottom line of the lender.  Just think of the financial benefit to a lender if they can sell you a new product every few years as opposed to one sale every 15 or 30 years.

    For a glossary of mortgage related terminology go HERE

MORTGAGE RELATED LINKS

FannieMae
Fannie Mae financial products and services.
FreddieMac
Freddie Mac financial products and services.
E-Loan
A full range of mortgages, auto loans, credit cards and small business loans.
FiNet
Funding for the American Dream.
Build a Mortgage. Mortgage tools and information.
National Foundation for Consumer Credit
Consumer credit counseling services.
Fincalc
Financial calculators.

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