Posted on: 13th Nov, 2007 06:39 am
Was unswering a post and desided to put this up here. Most of the consumers know that they need to check around for better rates and or programs but almost none of them know how to do it correctly. So they ruin their credit by having 20 pulls in single month. Or they shop till some loan officer tells them what they want to hear (usually a lie) and go with them. Some think a loan officer gives them financing based solely on their credit. Others think if they dont tell something or add something it will help them.
So here is the better way to "shop" for rates.
Just dont go around having 20 ppl pull your credit. Have one pull your credit (preferebly one you trust and is a reputable lender) then he should tell you what are the pitfalls in your credit and what you can expect. Then along with your credit score and some expectations in mind you can make a scenario wich you can shop around with. Should look something like this.
You call a (lender/broker) and say, hello my name is John Doe.
I got a house valued at (value based on home sales in your neighbourhood).
I bought it in (year bought).
I last refinanced (year/mon refinanced).
I owe (ammounts owed on 1st and second).
I pay (ammount per mon on first and second).
My loan is (fixed/arm/interest only).
My taxes are (taxes per year or mon) and my insurance is (ins per mon/year), and are (included / not included in my mortgage). If you rent then (how long/how much per mon, and management co or private party).
I work as a (profession) for ( # years) and make ($/hr, $ mon/$year), I am (self employed/W2 employee).
I also recieve income from (SSI, Retirement, Trust, Annuity, Child Support).
I (can/cannot) document all this income. (if self employed tell what is your adjusted gross income).
My spouse/coborower (work, salary ect).
I/We have following assets (checking/savings, stocks , bonds, whole life, 401K, Helocs with open limit), so my total assets are (total assets).
I owe ( ammont owed on credit cards, carloans, student loans other mortgages).
My payments per mon ( itemised payments per nom on each category). My credit score is ( your credit score).
I have had following credit issues in the past.( lates within 12 mon, 24 mon, collections, judgements, bankruptsies, foreclosures)
I am looking for (consolidating my debt/reducing my payments/specific loan programs).
What do you think you can do for me?
If you have all this information you will get honest and realistic quote from any loan officer and they will be very impressed with your knowlege.
Lastly when you compare the 2 lenders/brokers get good faith estimates. They will accurately show what is being charged/rates ect. And then you can compare apples to apples. Also inquire if your future loan will have prepayment penalt, how long it is fixed for, is there mortgage insurance.
There are standard costs typically charged on the loan they are Origination, Prepaid Interest, Appraisal Fee, Underwriting Fee, Processing Fee, Credit Fee, Flood Certification, Mortgage Registration Tax, Closing Fee, Title Fee, Doc prep fee, and if you setting up escrow 2-6 mon worth of taxes and insurance in your escrow account. If any of thouse arent in there there is a high possibility they will be on there by the time you get to the closing table and the loan officer doesnt want to show them to you. If there are alot of other fees there is a high possibility they are made up and you should ask for the explanation.
General rule of thumb if something is too good to be true it is likely is. If you have 3 guys telling you they can get you 6.5% on a 30 yr fixed and one guy who is promising 5.5% he is lying. On the other hand if someone offering 6.25 in same scenario it can be possible.
In the end check the math if rate is the same and loan ammount is the same then payment should be the same. If payment the same and rate is the same then loan ammount should be the same. (if its higher ther is a potential for hidden cloing costs)
Procrastination is your biggest enemy. Once you did your homework get the best deal with person you trust and go with it. Dont lead people on. Dont be afraid to tell someone that you have decided to go with another company ( you might be able to get better deal even) and dont be afraid to call back to the other guy if the first choice fails.
So here is the better way to "shop" for rates.
Just dont go around having 20 ppl pull your credit. Have one pull your credit (preferebly one you trust and is a reputable lender) then he should tell you what are the pitfalls in your credit and what you can expect. Then along with your credit score and some expectations in mind you can make a scenario wich you can shop around with. Should look something like this.
You call a (lender/broker) and say, hello my name is John Doe.
I got a house valued at (value based on home sales in your neighbourhood).
I bought it in (year bought).
I last refinanced (year/mon refinanced).
I owe (ammounts owed on 1st and second).
I pay (ammount per mon on first and second).
My loan is (fixed/arm/interest only).
My taxes are (taxes per year or mon) and my insurance is (ins per mon/year), and are (included / not included in my mortgage). If you rent then (how long/how much per mon, and management co or private party).
I work as a (profession) for ( # years) and make ($/hr, $ mon/$year), I am (self employed/W2 employee).
I also recieve income from (SSI, Retirement, Trust, Annuity, Child Support).
I (can/cannot) document all this income. (if self employed tell what is your adjusted gross income).
My spouse/coborower (work, salary ect).
I/We have following assets (checking/savings, stocks , bonds, whole life, 401K, Helocs with open limit), so my total assets are (total assets).
I owe ( ammont owed on credit cards, carloans, student loans other mortgages).
My payments per mon ( itemised payments per nom on each category). My credit score is ( your credit score).
I have had following credit issues in the past.( lates within 12 mon, 24 mon, collections, judgements, bankruptsies, foreclosures)
I am looking for (consolidating my debt/reducing my payments/specific loan programs).
What do you think you can do for me?
If you have all this information you will get honest and realistic quote from any loan officer and they will be very impressed with your knowlege.
Lastly when you compare the 2 lenders/brokers get good faith estimates. They will accurately show what is being charged/rates ect. And then you can compare apples to apples. Also inquire if your future loan will have prepayment penalt, how long it is fixed for, is there mortgage insurance.
There are standard costs typically charged on the loan they are Origination, Prepaid Interest, Appraisal Fee, Underwriting Fee, Processing Fee, Credit Fee, Flood Certification, Mortgage Registration Tax, Closing Fee, Title Fee, Doc prep fee, and if you setting up escrow 2-6 mon worth of taxes and insurance in your escrow account. If any of thouse arent in there there is a high possibility they will be on there by the time you get to the closing table and the loan officer doesnt want to show them to you. If there are alot of other fees there is a high possibility they are made up and you should ask for the explanation.
General rule of thumb if something is too good to be true it is likely is. If you have 3 guys telling you they can get you 6.5% on a 30 yr fixed and one guy who is promising 5.5% he is lying. On the other hand if someone offering 6.25 in same scenario it can be possible.
In the end check the math if rate is the same and loan ammount is the same then payment should be the same. If payment the same and rate is the same then loan ammount should be the same. (if its higher ther is a potential for hidden cloing costs)
Procrastination is your biggest enemy. Once you did your homework get the best deal with person you trust and go with it. Dont lead people on. Dont be afraid to tell someone that you have decided to go with another company ( you might be able to get better deal even) and dont be afraid to call back to the other guy if the first choice fails.
Eugene,
Great advice.
The only thing I would like to add is that many lenders/brokers good faith estimates are not always accurate. When you sit to review them, please look for discrepencies and ask the lender why the charge is/is not on theirs. As you eluded to - many will "accidentally" leave off charges so their estimate will look better. Please do not allow the best bottom line GFE to always win as you may really be in for a shock when it comes time to sign.
Great advice.
The only thing I would like to add is that many lenders/brokers good faith estimates are not always accurate. When you sit to review them, please look for discrepencies and ask the lender why the charge is/is not on theirs. As you eluded to - many will "accidentally" leave off charges so their estimate will look better. Please do not allow the best bottom line GFE to always win as you may really be in for a shock when it comes time to sign.
Eugene said:
"So they ruin their credit by having 20 pulls in single month......Just dont go around having 20 ppl pull your credit...."
So Eugene, just make sure that I am reading and understanding your statement correctly. If a person goes out and shops around for a good interest rate for their loan and gets five pulls for the loan, that those five pulls will/could be determental to a persons score? Even if the pulls were within the home loan industry?
I was always with the understanding that as long as the pulls where for/under the same industry that the pulls wouldnt be a factor... In this case a house loan.
The trouble starts when one starts looking at financing loans for cars and the like while shopping around for a home loan. If the person has a couple of pulls from several car dealers while looking for a home loan, that the pulls will effect the home loan and vice versa...
Am I reading your statement correctly?
SunDevilsFan
"So they ruin their credit by having 20 pulls in single month......Just dont go around having 20 ppl pull your credit...."
So Eugene, just make sure that I am reading and understanding your statement correctly. If a person goes out and shops around for a good interest rate for their loan and gets five pulls for the loan, that those five pulls will/could be determental to a persons score? Even if the pulls were within the home loan industry?
I was always with the understanding that as long as the pulls where for/under the same industry that the pulls wouldnt be a factor... In this case a house loan.
The trouble starts when one starts looking at financing loans for cars and the like while shopping around for a home loan. If the person has a couple of pulls from several car dealers while looking for a home loan, that the pulls will effect the home loan and vice versa...
Am I reading your statement correctly?
SunDevilsFan
Great post Eugene.
Hello Eugene,
Great post ! Such detailed information will really help the home buyers.
Great post ! Such detailed information will really help the home buyers.
a1sundevilsfan you reading me correct. If you pull 3 times in one day nothing will happen if you pull 5 times in a span of 2 weeks your score will drop. It might not drop much but it might move you from one braket to another hence giving you a worse options on the loan. Now if you shopping with everyone in town pulling 10+ times over period of 2-3 weeks i have seen scores go down as much as 60 points from pull wich could move you from 720 score down to 660 wich is a big difference.
