How to Shop For Your Mortgage Loan-Part 2

Last edition, we started laying out some guidelines
for helping you to shop for your mortgage loan.

The beginning topics were:

1. Know Your Outcome.
2. Be Realistic.

As mentioned in Part 1, realize that these "steps"
are fluid and part of a dynamic process. Don't
think of them as purely sequential, to be taken
one after another. In fact, topics 3, 4, and 5 are
pieces of a puzzle that will help you pull a workable
picture together for you.

Now, on to the next topic:

3. Choosing A Lender

You need to do proper research to make your best
decision. But how do you know who to trust for
solid information?

I suggest that you get recommendations from
people you know who have more experience or
who know the reliable players in the local market.

Ask your real estate agent for names of mortgage
originators. Although there are cases where real
estate agents and lenders work together in an
unhealthy manner, the best agents want their
clients to be served well, and want their transactions
to come to a successful conclusion as smoothly
as possible.

Ask your work associates if they had a good
experience with their lender and get recommendations
from them.

Treat print ads and radio ads with the understanding
that those ads are designed to get the lender's
phone to ring. If they are quoting interest rates,
realize that the quotes may be outdated by the time
you respond. Some lenders deliberately promote
very low rates, knowing that they won't have to deliver
them, but giving them the opportunity to start the
process with the borrower. Reality is presented at
a later date, sometimes when it is too late for the
borrower to make a change.

You should get 5-10 solid recommendations from
your trusted sources and additionally may want to
give a call to some of the advertising lenders.

As you make your research calls, think of it as an
interview process. You are going to do the hiring
of a loan originator to help you reach your goal.

Gathering loan data will be important, but I would
recommend that you also focus on the manner in
which your questions are answered, and how helpful,
considerate, and caring the originator is.

Does the originator:

A. Return your calls in a reasonable period of time?

B. Ask lots of questions to make sure that they
understand your situation, or do they offer a solution
before diagnosing what is appropriate?

C. Have a limited array of loan products that they
try to fit you into, or are they taking your needs and
qualifications to find the best match from the
marketplace?

D. Give you a feeling of transparency about the
transaction? You deserve straight answers to
your questions so that you can make an informed
decision that serves you well.

As you talk to several lenders, you will learn some
new things as you go along. If you can ascertain
a "red flag" that may be troublesome, make sure
you ask about that with each lender. How each
one answers that question may give you important
insights as to who you want to work with.


4. Deciding on a loan product.

As you speak with various lenders, you are going to
get some ideas about loan products that are both
appropriate for your situation, and that may be
approvable under current guidelines.

Unfortunately, sometimes the loan that best fits
your needs may not be available based on your
qualifications.

Factors that affect that availability can include:

A. Credit Score
B. Stability of employment, or self-employment.
C. Stability and adequacy of income.
D. Property considerations.
E. Amount of down payment.
F. Amount of cash reserves after closing.
G. Percentage of monthly obligations in relation to
your income.

I would suggest that as you gather information from
your loan originator prospects, you also get their
top 2 or 3 loan product recommendations.

These recommendations should be based on their
complete understanding of your situation, your
needs, your goals and their interpretation of current
underwriting guidelines.

Have them state their case as to why they think
these are appropriate loan choices for you. Again,
this type of discussion allows you to determine
the quality of the originator. Are they trying to make
the best match for you based on your needs, or
are they just trying to sell you a loan?

If you have 5-10 potential lenders and each of them
offer 2-3 loan program choices to you, you will probably
find that there are at least 3-5 loan programs
that end up receiving high recommendations over and
over. Hopefully, these 3-5 choices will also be ones
that you find acceptable, and you can narrow your
focus to the rates and fees.


5. Assessing Rates and Costs

The mortgage market is dynamic.

It is not uncommon for the 25-30 lenders with whom
I work to offer rates first thing in the morning, and as
the money markets unfold during the day, to make
adjustments up or down to reflect the market activity.

To give yourself, and your loan originator finalists,
the best opportunity to get accurate information you
should get quotes from each of them on the same
day, and hopefully all in the morning or all in the
afternoon.

You should know how long your proposed escrow
period is going to be. If you are purchasing, it will
be stipulated in your purchase contract. If you are
refinancing, it may be based on how long the
lender needs to work their way through your file
after it rises to the top of their incoming business.

Let's say that the escrow period will be 45 days.
You need to ask each of your lenders what the
rate and fee quote would be if you locked that
day for a 45-day period. Rate locks are often
offered for 15-, 30-, 45- and 60-day periods.
You have to compare apples to apples to avoid
misunderstandings and confusion.

Through your initial conversations with the loan
originators, you should have had the opportunity
to explore the comparisons of interest rate quotes
with zero points, 1/2 point, 1 point, and maybe 2
points. Make sure that all of your originators are
quoting based on the same terms.

In addition to the loan origination fees, ask
specifically what other loan-related fees will be
charged by that lender. These may include loan
processing fees, administrative fees, and document
preparation fees.

Other fees that will be part of your closing costs
will include escrow fees, title fees, appraisal and
credit report costs, notary and sign-up fees, and
pro-rations of interest, taxes, and insurance. For the
most part, these costs will be the same no matter
which lender you select. But be clear on all of your
anticipated charges, and make sure to understand
which ones end up with your lender.

You can see that these three steps give you an
opportunity to interview and gather information, with
you circling in on your final choice.

If you are diligent about including all of these
recommendations in your search pattern, I think
that you will discover the right person with whom
to work, and you will give yourself an opportunity
to feel confident that you are make good decisions.