May be buying our first house in the near future so this will be the first in a series of tapping the collective. Ironically I know how to hedge a mortgage portfolio but know only the basics of the underlying products. So what are some good resources for educating myself on them and more importantly how “they” are going to try and screw me.
Make sure your credit scores are all cleaned up, I had a $500 judgement that was not even mine on one of them and it almost cost me my loan at the last minute. Just know that everything and then some has to be spotless, and they really only care about income, not assets.
Do you know what product you are going to go after? I have been doing 7/10 year ARM’s on the last 3 because they are way less money, and never really planned on living in the houses for 30 years.
Really shop around, if you are doing a Jumbo I would recommend looking at Wells, they hold their own paper and have better rates than the conventional. Remember to do a floating rate lock, one where you can get one other bite at the apple if rates go down during the term of your lock. Don’t let them charge you for that either, they try. I also got some money back because I used to be a member of a union, just some offer that the loan was offering. They also don’t like to tell you about those things either, so ask if anything like that.
You will get frustrated, I almost fired my guys many times over, but count to 10, take a deep breath, and realize that starting over with someone new is probably not going to be better, so just tough it out if you got good terms going for you.
Good luck, let us know how it goes…
It comes down to rates, fees, and service.
Rates are pretty obvious.
Fees can be origination, discounts and credits (if you take a higher rate, you can get credit for closing costs). Pay attention to processing fees and what they charge for an appraisal.
I think service is one of the most important things. Find a lender that gets their crap done quickly and does as much up front as possible. They should be fully prepared for underwriting even before writing a prequal and that means reviewing all docs when you apply. You want to only send in paperwork two or three times, not 12. You want a quick and reasonable underwriting team so that they don’t ask for crap documents. Good service means they can close on time and not dick up your home purchase 4 days before.
investopedia has first time home buyer guidance and tutorials on mortgages. Closing costs and prepaids can be a bit confusing…really where I think they screw u is advertise one rate and it can change pretty quickly i.e. A year ago I talked with mortgage folks advertising about a 15 yr fixed refi at 2.5% but voila by time I did quick turnaround on paperwork it was up to 2.625.
That and bigger companies seem to charge higher closing costs, but today everything is so competitive so shop (@ least 3 or 4). Good luck and congrats. Maybe lawyers on forum can offer insight into title insurance value/cost.
Real property taxes in Illinois (my long ago home state) are outrageous. So go into it knowing you will be screwed.
There are lots of products, some private (conventional), some public (FHA/VA -if you qualify, VA would be a good way to go)
Type and cost of product available depends on purchase price, down payment, credit profile.
Be aware of mortgage insurance. It’s required for most, if not all, FHA (fannie mae) backed loans. You can avoid it using conventional financing, if available. Avoid it if you can. You would get better value setting your cash on fire and watching it burn than you would paying mortgage insurance.
Consider first and second notes (HELOC) in lieu of jumbo, depending on the applicable rates.
Get prequalified.
Consider a mortgage broker. I’ve used them. Yes they cost money. But they can help shop around for better rates than you might be able to find on your own, and save you time.
I can’t imagine getting favorable rates, or cost concessions, from a big lender like Wells, and who cares if they hold their own paper.
Fixed vs. variable rates is open to debate. You can do the math and figure out what works best for you considering your risk tolerances.
Clean up your credit file, as suggested. Don’t even apply for credit, eg credit card, car loan, etc for 6 months before you intend to apply for a mortgage.
Plan for a financial colonoscopy when you do apply. Having your financial docs organized and readily available will soften the blow.
I’m sure there’s lots of stuff I’ve forgotten but this is a start.
Been a while for us, but believe it or not we got a great deal through Costco. Worth a look if you are a member. They have 3-4 compete for your business and at the time all were better than our local banks and a few others we researched.
drn92
Pull together every single piece of documentation they are likely to ask for.
Birth cert, marriage cert, proof of all income including bonuses and OT or whatever, proof of at least 5 years addresses employment contracts
Interest only with no early or limits on repayments
Depending om your position look at HNW / private client options for preferential rates e.g. HSBC Premier just allowed a friend to open his account by putting their minimum deposit in but they allowed him to use that towards the property. So he basically got a slightly better rate by accessing their higher net worth accounts.
Depending on your view, if someone offered 5-10 year fixed and i knew i was not moving house for the foreseeable future and the political system had gone crazy i would seriously consider it.
You also want to consider how competitive the housing market is. Where I live I bet you could not buy a house with a VA loan. If there are multiple offers that is the first one people will avoid due to the paperwork requirements. Good deals if it’s not a competitive real estate market. (I know this does not sound nice- but it’s reality - sellers will take a combo of best offer and most likely to close as written and VA loans are often a risk for closing on time and without weird inspection contingencies etc).
I sold a condo to someone using a VA loan and had to redo the contract about 15 times including 3 after the money was already in my account. That’s after we closed two weeks after closing date in contract due to getting all of the paperwork correct.
Points, are they worth it?
It’s going to be a jumbo (most likely) and we will have 30 to 60% down. Our plan is to have it paid off in 3 to 7 years but want a longer term loan to manage monthly cash flow just in case. Arms are interesting but there’s asymmetric risk and the monthly payment is only about 400 bucks less than a fixed 30 year.
Points, are they worth it?
It’s going to be a jumbo (most likely) and we will have 30 to 60% down. Our plan is to have it paid off in 3 to 7 years but want a longer term loan to manage monthly cash flow just in case. Arms are interesting but there’s asymmetric risk and the monthly payment is only about 400 bucks less than a fixed 30 year.
If you are planning on living there long term then points can be a good way to pay it off early. It can take years off your payments. If youre planning on paying it off that quickly, it may not be as large a savings. It can also be a good idea if the seller is willing to pay closing costs, but good luck with that in a competitive market.
Been a while for us, but believe it or not we got a great deal through Costco. Worth a look if you are a member. They have 3-4 compete for your business and at the time all were better than our local banks and a few others we researched.
drn92
So we aren’t that far from getting a JD at costco then 
If you are putting up a large amount up front, and want to pay it off (very) quickly, why not go for a 15-year fixed? The interest rate is much lower…
If you are putting up a large amount up front, and want to pay it off (very) quickly, why not go for a 15-year fixed? The interest rate is much lower…
Because we want the flexibility of a lower payment if needed
On any fixed in uk u r limited to paying no more tha 10% of outstanding balance per year before incurring charges and you pay a significant exit fee if you change lenders before period is up. Is it different there?
On any fixed in uk u r limited to paying no more tha 10% of outstanding balance per year before incurring charges and you pay a significant exit fee if you change lenders before period is up. Is it different there?
You betcha
Lucky you. Pretty stupid if banks to let you fix at one rate for 15 then refi at no cost if u can get a better rate
Lucky you. Pretty stupid if banks to let you fix at one rate for 15 then refi at no cost if u can get a better rate //
Of course there is a cost, each loan or refi you do comes with a cost. That is why banks love you to do this, interest is always there but how many times you actually pay for your loan is where they make a lot of money. In fact the interest is so minimal that most banks sell your loan to someone else pretty much right away, within a couple years usually. They make their money giving you the loan, then selling it to someone else, and a tiny bit of interest in the interim.
Points, are they worth it?
It’s going to be a jumbo (most likely) and we will have 30 to 60% down. Our plan is to have it paid off in 3 to 7 years but want a longer term loan to manage monthly cash flow just in case. Arms are interesting but there’s asymmetric risk and the monthly payment is only about 400 bucks less than a fixed 30 year.
Out of curiosity, why wouldn’t you hold the mortgage to term even if you have the dough to pay early? Tax deductions on mortgage interest, low rate lock, time value of money, seems like you’re better off putting that cash elsewhere and holding onto the mortgage, no?
Points, are they worth it?
It’s going to be a jumbo (most likely) and we will have 30 to 60% down. Our plan is to have it paid off in 3 to 7 years but want a longer term loan to manage monthly cash flow just in case. Arms are interesting but there’s asymmetric risk and the monthly payment is only about 400 bucks less than a fixed 30 year.
Out of curiosity, why wouldn’t you hold the mortgage to term even if you have the dough to pay early? Tax deductions on mortgage interest, low rate lock, time value of money, seems like you’re better off putting that cash elsewhere and holding onto the mortgage, no?
Debt free = No worries
It’s not like we aren’t saving sufficient amounts it’s just with our saving patterns it will most likely mean we will have it paid off. If interest rates take off then we may arb it but right now it makes more sense to pay it off ASAP
What sort of fees? My last arrangement fee was 999 sterling.