Some of the most rewarding experiences I've had as a Realtor have been with first-time home buyers. I've found that they ask some VERY good questions, and thought it might helpful to other new buyers if I started documenting the critical questions and answers that are essential to the home buying process...
Q: How many lenders should we contact to compare rates?
A: I would recommend that you compare rates with at least 2 or 3 lenders, but that interest rates are not the only thing you should keep in mind:
1) Sometimes lenders give you a lower interest rate or lower closing costs, but charge you higher fees at closing. For example, there are loan origination fees (about 0.75 to 1.0% of the loan), loan processing fees, courier fees, appraisal, etc.
2) Interest rates should be fairly similar from lender to lender, as the rate is primarily based on your credit score and the type of loan you would like to use. The exception is that interest rates can vary based on the type of loan you are interested in.
3) There are many different types of loans - the basic Principal & Interest (P&I) Loan with a 20% down payment usually gives you the best interest rate, but there are many types of loans that may better suit your personal needs. If you don't have the 20% down payment, there P&I loans based on a 3%, 5% or 10% down payment, there are loans with a fixed interest rate that offer you the option to pay interest only for the first 10 years of the loan.
4) If you do not put down 20%, usually the lenders will charge you "Mortgage Insurance", which is tax deductible. There are also loans where the interest rate may be a little higher, but you don't have to pay the mortgage insurance.
5) To ensure that your credit score is not impacted, experts say that you should shop for all of your loans in a two week period. If all the loan officers pull your credit reports during that two week window, it should have no (or minimal) impact on your score.
Tips when shopping for a loan:
· Make sure that you are comparing "apples to apples" (i.e that the loan programs are the same)
· Ask for a Good Faith Estimate so you can see the breakdown of all the fees
· If you are financing more than 80% of the purchase price and need to get two different loans (i.e. one for 80% and another for 10% of the purchase price), be sure to ask the loan officer for a Good Faith Estimate for BOTH loans.
If you have questions that you would like to add to the Weekly Q&A, please contact Kerry Lucasse.
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In & Around Atlanta Real Estate Blog - Copyright 2006 - 2014 by Kerry Lucasse and the Nest Atlanta team with eXp Realty Atlanta. All information contained in this blog is deemed to be reliable but not guaranteed. If you need assistance with Intown Atlanta real estate, Kerry Lucasse and the Nest Atlanta Real Estate Group are always available to assist you with your residential real estate needs!
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