Around 90% of the time, the first question that potential clients ask me is about the rate I offer.
This makes sense: Consumers are always on the lookout for the best deal, and first-time home buyers tend to be especially concerned with getting a good rate.
However, when it comes to mortgages, finding the best deal is about more than the rate alone. You will be tied to your mortgage for years, and need to take all of the following elements into consideration to ensure you’ll be happy with it in the long run.
What to Consider
Ambiguity around underwriting and loan progress is slowly dissolving thanks to more lenders providing online platforms for you to track the loan process. If your Seattle mortgage broker hunt takes you to a lender without an online platform, you’ll want to uncover the following pieces of information:
- Lender and third-party fees (Request that these be provided in an estimated fee sheet.)
- Average time to closing
- Specific loan product requirements for debt-to-income ratio, down payment, credit score, etc.
- Timeline to lock and cost in a mortgage rate
- Which documents you need at each point in the loan process and their respective submission deadlines
Make sure the advisor is upfront about the mortgage application process and keeps you in the loop.
The Seattle metro area has been very competitive in recent years, with more buyers than homes, so sellers often have competing offers to choose from. When given the choice, many sellers and listing agents prefer buyers with local lenders whom they can talk to and who know the market more intimately than out of state discount lenders.
Working with a local advisor and lender may pay off in the long run, even if it means foregoing cheaper options.
Mortgage brokers make money in two primary ways: fees and yield spread premiums.
Fees usually come in the form of points, where one point equals 1 percent of the loan amount. Most brokers list this as the mortgage broker commission or lender’s origination fee. Additionally, application, funding, document preparation, processing, and other fees are included.
Yield spread premiums work differently. Say, for example, that you qualify for a loan at 7 percent interest, but the broker convinces you to take a loan at 8 percent. As a result of this, the lender pays the broker several thousand dollars. The payment made from lender to broker is the yield spread premium. While yield spread premiums are not intrinsically bad, they primarily help the broker and lender rather than the borrower.
Ask the broker how they will be compensated, and consider whether this will have a positive or negative impact on your dealings with them.
Some brokers take their chances gambling with rate locks. When you tell them what rate you want to lock on, they will agree to it verbally. Afterwards, they go looking for lower rates, intending to keep the difference for themselves.
In order to avoid this, ask for a loan commitment letter from the lender. This should outline the interest rate, the date you locked the rate, and when that lock expires.
While a novice broker may be able to get you a good deal, experienced brokers provide invaluable quality assurance and peace of mind. Try to exclude brokers who have less than three years of experience from your search.
Also keep in mind that mortgage brokers have different niches, and you should be working with someone who specializes in brokering for homes. For example, if a specific lender only has experience in providing for business purposes, they will not be the best fit for you when buying a home.
[Related: Important Tips for Millennial Home Buyers]
If you found your broker from an advertisement or decided to walk in after driving by every day, ask for the contact information of the two or three most recent customers who closed their loans. Follow up with those references by calling them and asking how they felt the broker treated them. Be sure to ask if they would do business with the broker again.
First and foremost, you should feel comfortable with the person you are considering to work with as a loan advisor. You should feel that your potential advisor is going to take care of you, and that when push comes to shove, they have your back.
Make sure that they’re accessible, and will return your calls and emails in a reasonable amount of time. Ask if you’ll be able to reach them after hours whenever necessary.
Choose an advisor that you feel at ease with. If a potential advisor is at all condescending during your first meeting, trust your intuition. You need to be comfortable enough to be honest and ask any and all questions that you have.
Rate is important, and should be in line with other local lending options in the market. Instead of asking what the current mortgage rates are, directly ask the potential advisor what rate you can get. Have six pieces of information ready:
- Your credit score
- The amount of money being lent
- The length of time over which you are paying it off
- Whether it is a fixed rate or not
- The type of loan
- The amount you have saved for the down payment
However, after taking all of the above considerations into account, it should be clear why home buyers shouldn’t base their choice of mortgage advisor on rate alone.
Mortgages are like many other products and services, in that we get what we pay for. Hundreds of steps, checks, and procedures must be carried out successfully for a mortgage transaction to end successfully so that a purchase closes on time. If your mortgage advisor can’t make this happen, your hard-earned money will be going to waste.
[Related: Sign Up for Our Mortgage Rate Watch]
For something as important as a mortgage, you need to work with someone you can trust — and that involves more than just finding a good rate.
Seattle Mortgage Planners has been in business for over 10 years. We offer extremely competitive rates and require no application fee, but more importantly, we provide the convenience and security that are essential in a quality mortgage advisor. We’re available evenings and weekends to answer any questions you may have.
Book some time with us to get started on your mortgage application process.
Featured image via Pixabay
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