First steps? Broker, Lender GF Estimates, Pre-approval? (loan officer, interest rate, real estate)

[Idlewile]

Forgive me; first and last time we bought a home it was new construction and we used the builder's lender, thus, everything was set up for us and the only decisions to make were what type of loan we wanted. Getting pre-approved, getting good faith estimates, selecting a lender, (or a broker) is NEW to us and we're unsure of the order of these steps when we want to be as proactive as possible.

Background: Looking to buy an older home in spring, plan to start looking Feb/March. Likely 250-300K. Good credit (haven't pulled the scores yet though). One income, at job one year in new state. (We used to be double-income but had a more expensive house in more expensive state -- sold it last spring, moved here for quality of life change). Could put down 10% on 270K. High property taxes here, 2.4%. (no state income tax)

We are most concerned with our total monthly payment (mortgage, ins, and high taxes combined) and run estimates based on listings here, based on a 5% rate BUT want more concrete figures to depend on. We want to be pre-approved and have the most accurate numbers possible BEFORE beginning to look at homes. We don't like surprises, wish to be proactive and need to confirm our next steps. Help me do this!

Questions:
Is 10% down on 270K with good credit, 30 yr fixed going to get us a loan these days or am I smoking something? (Could be roughly 31% going to housing payment -- including mort, ins and taxes -- based on net income, if that's helpful; the high taxes make it SO much higher )

What rates can we expect to see? Lower than 5%?

Should we. can we get Good Faith estimates from several different lenders now? Is GFE even the right term?

Is a GFE also pre-approval or is pre-approval only applicable once you've selected a lender?

Can we enlist broker for GFE's or proposed loan packages now or do you only use a broker once you're under contract?

We want as few surprises as possible and want as much info on our situation NOW before we look at homes. Your insight is much appreciated.

[NinaN]

I recommend speaking to more than 1 mortgage broker so you can shop the mortgage. They should be able to help you understand the amount of mortgage you can qualify for, the amount you might be comfortable paying, and what your up front costs will be. For the most part, the rates will be the same but the various fees will vary by broker. When comparing, make sure to look at all costs because the lowest fees might have higher interest rates, etc.

But definitely start with a pre-approval. That way you will have a better idea what you can afford before you start shopping for houses. And when you find that just right place, you can make an offer quickly because you already have your pre-approval in place.

[rational1]

Don't make this more elaborate than you have to. Go to your present bank and see what they will approve you for.

Many of your other questions can be answered by a real estate agent. I've been through it 3 times and I don't remember at what point the GFE happened.

[Idlewile]

Thank you both. I'm only asking the questions because I don't know the steps AT ALL -- I'm not trying to make it elaborate, I promise! Just trying to pin down a plan -- what come first, next -- what we can do before looking at homes.

Okay, so see what our present bank approves us for, even though I would not use them for a mortgage.

As far as brokers -- we have to pay them an extra fee for their services, correct? Is that a couple hundred dollars generally?

[Elke Mariotti]

Originally Posted by Idlewile

Thank you both. I'm only asking the questions because I don't know the steps AT ALL -- I'm not trying to make it elaborate, I promise! Just trying to pin down a plan -- what come first, next -- what we can do before looking at homes.

Okay, so see what our present bank approves us for, even though I would not use them for a mortgage.

As far as brokers -- we have to pay them an extra fee for their services, correct? Is that a couple hundred dollars generally?

Definitely find out first for how high a mortgage a lender would approve you and do your numbers from there. No sense in looking at houses you later find you can't afford - what a downer that is

There are four major options to obtain financing:

1. a bank
2. a credit union
3. a mortgage banker
4. a mortgage broker

If you're dealing with a Bank that's very active in the lending business, rates can be competitive; however, you will have to "fit in" whatever loan programs they have available at the time you officially apply.

Credit Unions are often local and subsequently can be more personal and possibly more flexible with terms.

Mortgage Bankers are both, a direct lender as in both of the above AND a Broker who deals with many different banks (see below); more flexibility than the above plus the advantage of (mostly) onsite underwriting, which can be a big help.

Mortgage Brokers are what the name implies, brokers who shop around among whatever lenders they have a relationship with to (hopefully) get you the best deal. Their fee is often 1% of the loan - but that can vary greatly and depends on several factors.

All of the above can charge an origination fee - it's important to ask!

In the end, the Loan Officer - wherever he or she works - can make all the difference because of knowledge and experience, as well as dedication to the client(s).

Good luck!

[Idlewile]

Originally Posted by Elke Mariotti

Definitely find out first for how high a mortgage a lender would approve you and do your numbers from there. No sense in looking at houses you later find you can't afford - what a downer that is

There are four major options to obtain financing:

1. a bank
2. a credit union
3. a mortgage banker
4. a mortgage broker

If you're dealing with a Bank that's very active in the lending business, rates can be competitive; however, you will have to "fit in" whatever loan programs they have available at the time you officially apply.

Credit Unions are often local and subsequently can be more personal and possibly more flexible with terms.

Mortgage Bankers are both, a direct lender as in both of the above AND a Broker who deals with many different banks (see below); more flexibility than the above plus the advantage of (mostly) onsite underwriting, which can be a big help.

Mortgage Brokers are what the name implies, brokers who shop around among whatever lenders they have a relationship with to (hopefully) get you the best deal. Their fee is often 1% of the loan - but that can vary greatly and depends on several factors.

All of the above can charge an origination fee - it's important to ask!

In the end, the Loan Officer - wherever he or she works - can make all the difference because of knowledge and experience, as well as dedication to the client(s).

Good luck!

Incredibly helpful, great detail! What would be an example of a mortgage banker? Are they companies?

Also, many people have mentioned in passing that, in this market, it can be a good thing to go with a local lender because they know the market versus big national banks or other lenders that are not local. What is your thought on this?

[Elke Mariotti]

Originally Posted by Idlewile

Incredibly helpful, great detail! What would be an example of a mortgage banker? Are they companies?

Also, many people have mentioned in passing that, in this market, it can be a good thing to go with a local lender because they know the market versus big national banks or other lenders that are not local. What is your thought on this?

You have a well-known mortgage banker in TX - Benchmark Lending; their main office is in Dallas. If you can wait till Monday, I'll get you the name and location near you of someone experienced at the company.

A local lender is always good, but as far as "the market" is concerned, in this environment, it's the appraiser who can make or break a deal and that's where "knowing" the neighborhoods can make a difference.

[Idlewile]

That would be great, thank you very much! No rush.