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Going to be purchasing our first home soon (California) and it's time
to start looking at how we are going to finance the purchase 30yr
fixed. At this point, we're uncertain whether or not to use a
broker. I used www.bankrate.com to run a search and compare what
lenders are offering in my area (Sacramento). Of course, a long list
of items pop up confusing me further. Is the most important thing to
look at the APR? Obviously, I am looking for the product that is
going to cost me the least in the long run. So is there a reason why
I shouldn't just go down the list and select the one with the lowest
APR and payment? Is there something I should be looking out for with
any of these lenders?
Thanks,
Hubert
<h...@y...com> wrote in message
news:1181787788.389475.158950@q19g2000prn.googlegrou
ps.com...
> Going to be purchasing our first home soon (California) and it's time
> to start looking at how we are going to finance the purchase 30yr
> fixed. At this point, we're uncertain whether or not to use a
> broker.
Have a look at this website: http://www.mtgprofessor.com/ , which is an
excellent place to find information about different types of mortgages, the
role of mortgage brokers, traps and scams of various kinds to watch out for,
and so on. The search for the best mortgage for a new home buyer is one area
of financial planning where a little research and patience can yield big
savings. You are definitely on the right track in being concerned about
finding what is best.
On Jun 14, 1:59 am, h...@y...com wrote:
> Is the most important thing to look at the APR?
In a word, no. Actually, the answer depends, in part,
on your financial situation, now and in the future. Also,
APR is not a good number to compare, despite its
intention for that purpose.
Two lenders might offer the same APR for the same
type and duration of loan, but they differ significantly in
monthly payment (i.e. interest rate) and up-front costs.
If you have little funds on-hand, but you can handle a
higher monthly payment (both now and in the future),
you might opt for the lender with the lower up-front fees,
but higher payment.
On the other hand, that is usually short-sighted. It is
usually better to find some way to scrape together
whatever money you need up-front, and get the monthly
payment as low as possible. It is difficult to predict your
future financial situation. But keep in mind that difference
between a 6% loan and 6.25% loan (30-yr fixed), for
example, is only $16 per month. It is up to you whether
that is worth any other differences. But usually, a
difference of a few (or a dozen) basis points (1/100th
percent) is not worth any other compromises that you
might have to make.
Bottom line: I would focus separately on the amount of
monthly payment (or interest rate) and the amount of
up-front costs, not the APR.
However, you usually cannot learn about __all__ of
the up-front fees costs you are approved for the loan.
The Truth in Lending law has a loophole: as long as
the lender explains that the rate may increase after
consummation, they can advertise just about anything.
So when you talk to a lender, be sure to ask if:
(a) they are providing you with a reasonable estimate
of __all__ of the up-front costs; and (b) if those costs
are likely to increase after consummation, why and
by how much. And do get all that in writing. I like to
ask for a disclosure statement with line items for
__all__ costs, even if the amount is blank.
Another criterion in the selection process: whether or
not the lender will require that you pay PMI, which is
added to the monthly payment. Again, they usually
cannot tell you that "for sure" until you apply for a loan.
But they should be able to tell you their criteria for
requiring it. I think that varies widely among lenders.
> Going to be purchasing our first home soon (California) and it's time
> to start looking at how we are going to finance the purchase 30yr
> fixed. At this point, we're uncertain whether or not to use a
> broker. I usedwww.bankrate.comto run a search and compare what
> lenders are offering in my area (Sacramento). Of course, a long list
> of items pop up confusing me further. Is the most important thing to
> look at the APR? Obviously, I am looking for the product that is
> going to cost me the least in the long run. So is there a reason why
> I shouldn't just go down the list and select the one with the lowest
> APR and payment? Is there something I should be looking out for with
> any of these lenders?
>
Ask questions. Compare products. If you are offered two equivalent
loans (same apr) from two places, compare closing costs.
I have bought two new houses and refinanced them both. By the 4th
close I was MUCH smarter than the first- learning how to compare lines
on the closing costs (Good Faith estimate) and what many of the lines
meant.
Some (most?) brokers charge a fee- this fee is something they will use
to buy your rate down when they sell the loan. You get no tax credit
for this fee.
If you took the same amount and paid the point yourself, you would
have a lower apr and could deduct this come income tax time. But it's
more work (to find the lender). Ask friends for referrals. Ask a
realtor for referrals. See what shakes out and trust your judgement.
For example, there was someone at NASB which handled our refinance and
I would recomend him again. NASB was 600+ miles from us (everything
was done over phone or via e-mail). I had to do some work to find an
appraiser, and he had to find someone to close on the loan for him
from my area.
But we closed the loan in my living room and I have a realtor which
appreciates making referrals. So all is good.
On Jun 14, 8:43 am, joeu2004 I wrote:
> The Truth in Lending law has a loophole: as long as
> the lender explains that the rate may increase after
> consummation, they can advertise just about anything.
I should add: that is another reason why I wrote:
"APR is not a good number to compare, despite its
intention for that purpose".
"jIM" <n...@h...com> wrote in message
news:1181827190.050453.227280@z28g2000prd.googlegrou
ps.com...
> Ask questions. Compare products. If you are offered two equivalent
> loans (same apr) from two places, compare closing costs.
All the above is good advice, but one further point should be mentioned. If
you have good credit and a substantial down payment, or some combination of
those two things, mortgage interest rates are negotiable. Most banks will be
happy to get your business and will offer you a lower rate than the one they
put in the newspaper advertisements. It is a good idea to shop around among
various lenders. And be sure to let each lender know right away that you are
shopping around and making comparisons. In addition to negotiating a lower
interest rate, in many cases you can also have various fees and expenses
waived or reduced (things like "application fees, appraisal fee, legal fees,
etc.)
h...@y...com wrote:
> Going to be purchasing our first home soon (California) and it's time
> to start looking at how we are going to finance the purchase 30yr
> fixed. At this point, we're uncertain whether or not to use a
> broker. I used www.bankrate.com
Hubert, if you don't mind subjecting yourself to some email for awhile,
you might try lendingtree.com. If nothing else it's a good way to get a
half-dozen actual offers to compare and if they stink, you can just do
something else. I ended up getting a mortgage through the site (via a
Texas lender I'd never heard of) and it was significantly better than
what the CA broker worked up. If the guy had done a bait & switch on the
fees, there was another lender from the site offering almost identical
rate + costs. I'm sold on the lending-tree concept (there are probably
other similar sites out there too).
One you're set on a 30-year fixed, it really is just a horse race on the
rate, factoring in the costs each will charge. Seems to lend itself to
an internet-based bidding process...really, what kind of "service" could
someone provide, to justify higher costs/rate?
-Tad
On Thu, 14 Jun 2007 03:59:18 -0500, h...@y...com wrote:
>Going to be purchasing our first home soon (California) and it's time
>to start looking at how we are going to finance the purchase 30yr
>fixed. At this point, we're uncertain whether or not to use a
>broker. I used www.bankrate.com to run a search and compare what
>lenders are offering in my area (Sacramento). Of course, a long list
>of items pop up confusing me further. Is the most important thing to
>look at the APR? Obviously, I am looking for the product that is
>going to cost me the least in the long run. So is there a reason why
>I shouldn't just go down the list and select the one with the lowest
>APR and payment? Is there something I should be looking out for with
>any of these lenders?
>
>Thanks,
>Hubert
Are you a member of a credit union that gives mortgages? If not maybe
you should join one. They are very usually much easier to deal with.
Sometimes their rates are slightly higher but usually their closing
costs are quite small and many of them still don't sell their
mortgages. I prefer them to the big money companies that just
repackage and sell to the highest bidder.
Thumper
h...@y...com wrote:
> Going to be purchasing our first home soon (California) and it's time
> to start looking at how we are going to finance the purchase 30yr
> fixed. At this point, we're uncertain whether or not to use a
> broker. I used www.bankrate.com to run a search and compare what
> lenders are offering in my area (Sacramento). Of course, a long list
> of items pop up confusing me further. Is the most important thing to
> look at the APR? Obviously, I am looking for the product that is
> going to cost me the least in the long run. So is there a reason why
> I shouldn't just go down the list and select the one with the lowest
> APR and payment? Is there something I should be looking out for with
> any of these lenders?
30yr fixed is good. The APR takes into account the points, if any, and
there's a trade off there. You can often 'buy the rate down' by paying
more points. I recall 2pts would buy the rate down by 1/4%, I may be off
there. I'd invite you back once you've narrowed it down. I favor paying
a bit more in the rate for the lowest closing expenses. A zero pt, zero
closing, if available in that area, is ideal. If the rate drops 1/2%,
you can just go back and refi. The refi also offer an opportunity to
throw some money at the principal, and pull the term in. For the house
I'm in now, I went from a 30 year (2 yrs old) to 20 yr for the same
payment. Large closing costs and points make this strategy tough.
JOE
The idea of searching for a mortgage online is very tempting. Is
there anything I should be watching out for when dealing with the
lenders that pop up. Are the rates that they show the actual rate/
fees that they are going to give me or are they going to try some
funny business once I call them back or go to sign some papers? That
part is a little scary.
Thanks!
> Hubert, if you don't mind subjecting yourself to some email for awhile,
> you might try lendingtree.com. If nothing else it's a good way to get a
> half-dozen actual offers to compare and if they stink, you can just do
> something else. I ended up getting a mortgage through the site (via a
> Texas lender I'd never heard of) and it was significantly better than
> what the CA broker worked up. If the guy had done a bait & switch on the
> fees, there was another lender from the site offering almost identical
> rate + costs. I'm sold on the lending-tree concept (there are probably
> other similar sites out there too).
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