Finding a Mortgage Loan for First Home

[Samwise]

Hey folks -- really appreciative of this forum.  I'm wondering how people have found good rates for mortgages, what process you used, any recommended lenders, and what terms to pay particular attention to.  Thanks in advance!

[Fishindude]

Do you have a bank?
Start there.

[Another Reader]

Make sure you know your credit score before you start.  If you have any mistakes in your credit report or messes to clean up, do that before you do anything else.

First, avoid the lead aggregators such as Lending Tree, Bankrate.com, Zillow and Realtor.com.  They will sell your information to almost anyone that will pay.  You will get dozens of calls from people that you largely want to avoid. Talk to your bank or credit union to get rate and terms information and to get prequalified.  They should not pull your credit to do that.  Do you have a real estate agent?  A good one should be able to point you to a mortgage broker or two that will price loans for you.  In many cases they will be cheaper than a retail lender because they deal with the wholesale side of the mortgage lenders.  Get rates and terms from them as well.

Once you are ready to buy, it usually helps to get preapproved with one lender from the best of the group.  That involves submitting your financial information and allowing the lender to pull your credit report.

Look at https://www.aimloan.com/ to get an idea of rates and terms for an on-line low cost lender.  I have used them in the past as a benchmark.  Quicken is nowhere near the cheapest, so avoid them.

[JZinCO]

Hey folks -- really appreciative of this forum.  I'm wondering how people have found good rates for mortgages, what process you used, any recommended lenders, and what terms to pay particular attention to.  Thanks in advance!

I've been through the process just once so I'm no expert.
Another reader hinted at a good strategy. People often choose a credit union (or regional bank), a national bank, and an online lender to compare. Popular sources are Wells Fargo, aimloan and penfed. Some people use a broker who basically shop around for you.
Get quotes from all three on the same day (very important!)
Make sure the terms are the same (e.g. 30 yr fixed for $X, no points). Sometimes they play games with points to sound competitive.
Do get closing costs but ask only for the loan specific costs like origination fee but not title insurance.
To find an online lender, sources like Zillow are good because they don't require user data (so no spam!) Unlike, say, bankrate. However, use that as a lead to follow up (advertised rates are often lower than quoted rates).

[Jon Bon]

Sam,

I get the feeling you are over thinking this thing a little bit. Based on this and your other post you sound like you might be entering paralysis by analysis.

Mortgages while a big deal, can be refinanced! So if rates drop to 2% (HIGHLY UNLIKELY) you just refinance into the lower rate. The loan is over a long period of time. So maybe in 5 years your making crazy money/windfall and you are in a position to pay the loan off.  Since you are here I am assuming there is a good chance you could kick the ass of nearly any loan that you end up getting.

For me I have a relationship with a lender, he offers decent rates, but he helps me get deals done. I dont care about 25 basis points on the loan if that means the difference between getting a house closed in 28 days versus not getting it closed.

Relax, walk into your bank or ask a friend who recently bought a house. Loans are pretty much all the same because they all end up being sold in the same place. So in theory the rate might by slight better at bank A, but might have higher closing costs then bank B.

The banks compete for your business my friend!

Good luck.

[Samwise]

Thanks all for your feedback, this is encouraging.  I am gonna follow up with a few different sources to compare rates and sources before I pick one.

Jon Bon -- I appreciate your feedback.  You are right that it's important to not get stuck and to get things done.  Keep in mind, this is for my personal home, not an investment property.  So I don't agree that I'm entering analysis paralysis.  This is MMM, where we crunch numbers and do the math rather than just go along and do what everyone seems to be doing and thinks is fine.  A difference of .25 percent on a loan could cost between 10-15 thousand dollars in interest over the course of a 30 year fixed mortgage.  I only posted two posts, to get input about the largest financial decision in my life -- I'm researching and being careful about an important choice :-)

I do appreciate your perspective that the banks compete for our business.  That's a nice way to think about it.

Again, thanks all for your feedback!

[Jon Bon]

Thanks all for your feedback, this is encouraging.  I am gonna follow up with a few different sources to compare rates and sources before I pick one.

Jon Bon -- I appreciate your feedback.  You are right that it's important to not get stuck and to get things done.  Keep in mind, this is for my personal home, not an investment property.  So I don't agree that I'm entering analysis paralysis.  This is MMM, where we crunch numbers and do the math rather than just go along and do what everyone seems to be doing and thinks is fine.  A difference of .25 percent on a loan could cost between 10-15 thousand dollars in interest over the course of a 30 year fixed mortgage.  I only posted two posts, to get input about the largest financial decision in my life -- I'm researching and being careful about an important choice :-)

I do appreciate your perspective that the banks compete for our business.  That's a nice way to think about it.

Again, thanks all for your feedback!

Yup fair enough. Maybe some of it is a personal choice, I dont sweat a few basis points. And be careful with that analysis of 10-15k over the life of the loan. But remember the real value is actually much lower.  Sure you loan payments might be $50 bucks a month extra, but if you discount that into the future the last $50 payment is actually worth 50/1.05^30 =$11.56 today.  Be aware, banks are slow as crap. So yeah that great teaser rate they just opened up you and 5000 others might be signing up for thus overwhelming the banks staff for making loans. Deadlines are a pretty big deal in real estate.

Something else to mention is house prices generally move against interest rates. So as they go up prices go down. Lesson being here dont be in a hurry to buy because rates are going up.  Emotion and impatience are your two biggest enemies here.

I think I have done about 10-15 loans so far and this has been my experience. Good luck out there.

[Samwise]

Thank you Jon Bon, this puts some things into context for me.  I really appreciate your input, it's helpful.  Planning to take the next steps soon :-)

[tralfamadorian]

I skimmed and didn't see it mentioned yet (sorry if I missed it), make sure to spend a little time looking for first home buyer's programs at your state and local level. You're only eligible for them once and they can be pretty great.

[clumlee]

I go with Northpointe Bank. Licensed in all 50 states. Rates are reasonable.