How to get a Stellar Home Loan. Six Steps to the Best Mortgage at the Lowest Rate with the Fewest Headaches

Transcription

1 How to get a Stellar Home Loan Six Steps to the Best Mortgage at the Lowest Rate with the Fewest Headaches

2 Home ownership is a smart investment and a major achievement certainly one worth planning. Whether you re in the process of buying or refinancing, you have specific questions and unique priorities that need to be addressed by a lending expert. Use the following steps to find your ideal mortgage partner and home loan terms. 2

3 Step One: Investigate Different Lenders Home loan lenders including banks, mortgage companies, and credit unions offer different benefits to different clients. Their rates and terms can change on a daily basis, and they re far from equal when it comes to customer service. To get started on finding your lender of choice, do your research. Search for local lenders online or ask your friends, family or Realtor for names of lenders they recommend. Once you have the name of a qualified lender, visit their website. Does it look like SPAM mail (overly promotional with flashing graphics and grammatical errors), or does it reflect professionalism? View the experience of management and scout for named representatives with actual photos and contact information. If a company is unwilling to show faces, bios, and credentials, that s a big red flag. For a more official evaluation, visit the Better Business Bureau s website, BBB.org. By entering a company s name, you can view your lender s BBB rating on a scale of A+ to F. (Ratings are based on client complaints, government actions, advertising practices, years in business, and other factors.) Additionally, some lending groups choose to seek BBB accreditation, which means they agree to be monitored and attentive to any reported complaints. Check the BBB site to see if your prospective lender opted for this extra level of consumer care. The lender s website might also have a link to the BBB website or display the BBB rating. 3

4 Step Two: Research Your Loan Officer A great loan officer can make a big difference in the home loan process. At the outset, you need to trust that you re getting straightforward, accurate advice. You want a dedicated ally, who will work to secure the best terms and rates on your behalf. Most loan officers promise financial results, but how do you know they will actually deliver? You will probably have questions along the route to closing especially as you complete the various forms and encounter terms you don t understand. Experienced loan officers are prepared to explain every aspect of your application and its status. Deadlines are also a key factor when you re buying or refinancing a home; there s not much room for snags and delays. Being able to call (and reach!) a knowledgeable professional is critical. Better yet, working with one that sets the proper expectations, proactively manages the process, and solves problems keeps everyone on track. Professional networking sites, like LinkedIn.com, can be useful in evaluating prospective loan officers. LinkedIn lets you browse their public profiles for important distinctions including professional experience, education, memberships, personal and company business profiles, awards, plus skills and expertise that are endorsed by peers. Even sites like Facebook can help you form a well-rounded impression of any prospective loan officer. Is he/she using social forums to share industry knowledge, or are they revealing unprofessional traits? For a more objective overview, research your loan officer by visiting NMLSConsumerAccess.org. This site offers free background information on financial services companies and professionals including mortgage bankers and brokers. You can confirm your loan officer is authorized to conduct business in your state, plus view any licenses he/she holds, any regulatory actions on file and a self-reported employment history. 4

5 Step Three: Request Real-Life References Online research is great when you re first starting to compare lenders and loan officers. A few clicks will help you weed out the bad eggs and save you from walking into any hard-sell traps. Website testimonials can give valuable clues as to the level of professionalism and care a company provides its clientele. But once your short list is established, you may need more nuanced information about the companies and professionals you re considering, especially if you found a lender on your own. This is where customer references come into play: ask for two or three. By contacting a lender s references you can bring the home loan conversation to a more human level (less inside terminology and sales speak), while talking to a homeowner who was recently in your position. Find out if the reference had a positive experience overall. Did the lender spring any surprise costs? Was the lender readily available via phone, , or in-person meeting? Some lending groups particularly today s larger companies focus more on the transactional stages of a loan. Their approach strives for efficiency. If you re new to home-buying or the refinancing experience, you may prefer a more consultative process. References are a good way to gauge how collaborative and customer service-oriented your lending partners will be. 5

6 Step Four: Compare Loan Types, Rates, and Lock Options As you probably know, you have several options when it comes to home loan types and repayment terms. A quick overview on home loan basics will help you compare the different options. Because without the right context, you may be weighing apples and oranges. In general, loan rates will differ based on the type of loan program you choose, the property type, your FICO credit score, and whether you are purchasing a home or refinancing. Loan Interest Options Are you looking for a predictable loan with a fixed interest rate? Most buyers are. But there may be good reasons for you to seek a lower, upfront rate through an adjustable rate mortgage (ARM), which is tied to market fluctuations, or a hybrid mortgage, which offers a fixed rate for a set number of years before turning into an ARM. If you know, for example, that you will need to relocate in the next few years, you might be a good candidate for a five-year hybrid/arm. Theoretically, you could sell before any marketbased adjustments kicked in. Ask your loan officer to explain all your options. Maturity Terms You can bundle loan payments into a 10-year contract, extend them over the course of a 30-year mortgage, or settle somewhere in between. These options present different advantages, drawbacks, and risks. Again, your loan officer can help you calculate and compare the tradeoffs of a lower monthly payment versus less accrued interest and, of course, help you determine what you can a ff o r d. Loan Types and Programs All loans are designed to ensure that borrowers aren t assuming too much debt, based on their credit histories, incomes, assets, and liabilities. And in 6

7 fact, many of today s loan requirements are stricter than they were prior to the housing market collapse. Still, there are plenty of options for buyers of different means and circumstances including first-time buyers, military veterans, and borrowers considering high-price properties that exceed regional averages. Depending on your situation, you might want to explore a government-backed loan for example an FHA or VA loan or you may apply for a conventional or jumbo loan. Discount Point Options Whatever you are initially quoted, you can reduce your mortgage interest rate by paying discount points at closing. Points are payable as a percentage of the total loan amount. By paying points (which is interest paid in advance) you can reduce your interest rate. If you plan to own your home and stay in your mortgage for a long period of time, a reduced interest rate can pay off. On the other hand, paying points does not reduce the principle amount of your loan. So if you sell your home before your interest rate savings add up to the cost of your point investment, you ll actually be losing money. Many of today s buyers opt to skip discount points and accept what is called the par rate instead. Some even take on negative points in order to offset upfront costs at closing. Mortgage Lock Periods When you find a great lender who s offering a great rate, you want to jump on the opportunity. But here again, it pays to examine risks and rewards. If you have found a home you want to purchase, you may choose to lock in your interest rate to cover you through your closing date. Keep in mind that the longer the lock period, the greater the incremental cost associated with the chosen rate. 7

8 Step Five: Beware of Hidden Fees Hidden fees, also known as junk fees, come into play when some lenders drum up line items for services they should freely offer or have already billed. In particular, be on the lookout for administrative fees or application fees that don t reflect any specific service, and can t be distinguished from other charges listed. Lender s attorney fees or document review fees are usually unnecessary items. Basic office functions such as , postage, or copying should not typically appear as separate lender charges. The good news is that hidden fees aren t really hidden. You ll see most major fees listed on a good faith estimate (GFE) of your closing costs, which you ll receive within days of submitting your loan application. With a GFE in hand, you can begin to review the lender s fee structure, and you may be able to negotiate any fees that the lender controls. The best way to avoid bogus loan fees is to ask questions up front. Ask for a detailed breakdown of settlement costs before you even decide on a lender and submit your loan application. Once you ve applied, review your good faith estimate carefully. Don t be afraid to question any figures especially if the interest rate you were quoted looks very different from the annual percentage rate (APR) on your loan package. 8

9 Step Six: Weigh the Quality of Service Without a doubt, obtaining a mortgage in today s market is a complex financial endeavor tied to extensive paperwork and countless regulations. When you find your ideal lender, what will become clear is that you trust them, value their advice and know they are doing everything possible to get you the best loan. If they ask questions and respond to yours, lead you through the process with clarity and confidence, and remain focused on your needs Congratulations! You ve found a mortgage partner worthy of your business. Jay Luber, Founder and President Galaxy Lending Group 9

10 Now that you re armed with these home loan basics, here s a head start on your first step: Visit and see how Galaxy Lending Group stacks up against alternative lenders. Galaxy Lending Group is always happy to provide client references and explain why their biggest investment is helping you move into yours. Galaxy Lending Group, LLC: NMLS ID , AZ Lic MB , Oregon Lic # ; Galaxy Lending Group, Inc: CA Dept. of Real Estate Real Estate Broker, DRE # , NMLS ID