Properly Shopping for a Mortgage
I have composed articles about this in the past, but the more I am in the mortgage industry, the more I see people making crucial mistakes when they shop for a mortgage. With that in mind, I decided to just make a simple list of what you shoud and should not do when finding a lender to finance your home purchase or refinance:What you should do:
1) Shop with at least four different mortgage companies or local banks in a time frame of two days
2) Do a full application with every one of these lenders, and let them pull your credit and give you an interest rate quote based on the information you have provided in your application. Tell them to print you a good-faith estimate.
3) Take each good faith estimate you have to each different loan officer and let them analyze it to see if you are being ripped off, charged junk fees, or otherwise misled.
4) As soon as you've got a lender you like and a sales contract (if you're purchasing) or property address (for a refinance), lock the loan with the lender you like.
What you should not do:
1) You should not ask your Real Estate agent about a good mortgage lender and then simply plan on doing your loan with that person. How do you know your agent and that person have not been friends for 20 years? While your agent might think the lender is a nice person, that in no way guarantees you're getting a reasonable deal on your mortgage.
2) You should not show your Realtor a good-faith estimate because you think they can tell you whether or not you're being ripped off. Unless they happen to have been working in mortgages within the last two weeks of you applying for your loan, and unless they happen to know your complete financial situation, anything they tell you is nothing more than a poorly-informed guess.
3) You should not go talk to one loan officer, decide you like them, and plan on having them complete your loan.
4) You should not spend more than 3 days trying to negotiate terms of your mortgage among various lenders. Even spending more than 24 hours can result in a daily interest rate increase that costs you money right out of your pocket.
I've dealt with a lot of people lately who seem like they want to get 4 or 5 banks competing for their business and then spend the next two weeks trying to nickle-and-dime fees or interest rates. In the meantime, the federal reserve raises key rates .25%, and the time they were wasting trying to get $50 pulled off of closing costs has now cost them thousands of dollars in increased interest rates.
Find 4 mortgage lenders, get applications filled out with all of them in the span of 2 days, and by the end of the second day, lock your rate with the lender that gives you the best offer. If, for any reason, they tell you that they need to wait to do that (and you have a purchase contract or property address in hand), go to the next-best offer and lock with them (there is never a reason you can't lock your rate, provided you have given a full application and have a purchase contract or property address).
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