How to Find a Good Mortgage Lender

The internet can be a blessing and a curse. Many buyers are now doing a ton of research online to get information on buying their first home which is great but I think they are overdoing a bit and missing the most important factor..a reputable lender. First of all, it takes many years of experience to understand and structure programs and if you do not meet one guideline, your loan is done..finished. My point is that many loan officers these days are promising great loans with unbelievable rates without doing their homework and the result is a time-bomb waiting to happen. These days the competition is fierce and they will tell you anything to get your business. For example, you apply for a special zero down bond loan program in your area which offers a grant and you are excited about the getting into a new home with a low payment and no money out of your pocket. Then, 2-3 weeks later you call the loan officer for status on your loan and he doesn't return your calls. Hmmmm....What is going on??? I will tell you. He found out you didn't meet one of the guidelines such as income requirement, the deal blows up, and he is hiding out in a bunker nowhere to be found. What about the low rate you locked into and the no closing cost promise? Kiss it goodbye. Now, you are scrambling for your life trying to find another loan officer and program days before closing. Don't get me wrong, there are a lot of good loan officers as well as bad ones, but you need to talk with somebody with experience in first time home buyer loans and who has your best interest at heart. I have had many people come to me right before closing after having a bad experience with a lender and I wish they would have not bought into "the too good to be true promise."

Secondly, do your research on the programs but don't apply to every online lender in the universe so you can't remember which ones you applied to and what programs they offered. Bookmark or save the best websites so when a loan officer calls you about your application, you have an idea why you contacted them.

Finally, you MUST ask for a Good Faith Estimate of the closing costs and get a "Total Cost Analysis" of the best 3-4 programs side by side so you can make the best decision on which program will work for you. Make sure you understand what the lender is actually charging you because they can low-ball standard charges such as title insurance to make it appear that their closing costs are lower. Go over every cost line by line and if you don't understand a cost then don't be afraid to ask about an item..it's your money. Another thing is don't get caught up in who has the lowest rate and closing costs in the world. You must look at the lender qualifications as well as the best program options based on your financial and personal goals. Many online lenders offer below market rates and costs but they may not deliver the loan you asked for and they may bait and switch before you close your loan. Believe me it happens more times than not and that is what gives mortgage brokers a bad name. In the end, trust your gut feeling..it is usually right..and you will get what you paid for and more.

Improving your credit score can save you from losing your home

The housing market was hot 2-3 years ago and many first time home buyers with lower credit scores in the 580-599 range bought homes with 2 year higher interest rate arm loans. In the last year or so, these arm loans are adjusting to the full rate market rate in the 10-12% range and borrowers who could not refinance to a better program are not making their payments and many homes are going into foreclosure. As a result, lenders are tightening up their guidelines and today you may not get a zero down loan with a credit score below 600. Many loan officers did not do a good job of explaining the pitfalls of these programs a couple of years ago and now the homeowner is paying the consequences, but there is good news. You must get on the road to homeownership early in the process so you can improve your credit to qualify for an excellent first time home buyer program. I encourage people with less than perfect credit to run a mortgage credit report and seek a consultation from an experienced loan officer at least 6 months-1 year before buying a home. You may be only 20-30 points away from qualifying for a great loan which usually requires a 600 credit score. FHA doesn't even have a credit score requirement but if you have had credit problems in the past, you will need to have a very good payment history on at least 4-5 accounts in the last year. Let's take a look at an example which a borrower is purchasing a $200,000 home and they have 2 loan options based on a 599 credit score. The first option is a sub-prime 5 year adjustable rate mortage loan, 5% down payment, 9.50% rate and the second option is an FHA 30 year fixed program, 3% down payment, 6.00% rate. The payment on the sub-prime loan is $1,504 interest only and the payment on the fha loan is $1,199 which is a $300 month difference in payment and you will not be paying off any principal on the sub-prime loan because only interest payment is required. You could refinance this loan into a more traditional mortgage after 1 year as long as you make your mortgage payment on time and you pay off any collections and/or judgements. The problem with this scenario is the fact that most people who take this loan program have $5,000-$10,000 collections which they didn't have to pay off to qualfiy for the sub-prime loan and they don't make a dent to pay off these account during the next year and they can't refinance into a "good loan." Now, they are stuck and they fall behind on the high interest only mortgage payments and they are forced into foreclosure proceedings. Don't get a band-aid loan and take on more debt just to buy a home because you think you need to be a homeowner right this second. You could pay thousands of dollars more in interest and you may lose your home. So, please do your homework and contact a real professional early in the process and clean up your credit to qualify for a great loan program.