DO NOT SIGN FOR A MORTGAGE BEFORE YOU READ THIS!
Ten Secrets That Save Money When Shopping For A Loan!
Some of the biggest misconceptions held by buyers relate to the
belief that all lenders, and all mortgages, are pretty much the same.
Also, buyers tend to think that the mortgage process doesn't start
until AFTER you find the house you want, and negotiate a successful
offer. These misunderstandings are not surprising when you realize
that the vast majority only experiences the mortgage process once or
twice in their lives.
Unfortunately, in this situation, Ignorance is certainly NOT bliss! If
you fail to ask the appropriate questions of your potential lender,
you may do serious damage to both your negotiating position and your
Questions You should Ask EVERY Lender BEFORE you shop for a house.
- Will you pre-approve me? This is very important.
Negotiating is much easier for the buyer when the seller KNOWS,
ahead of time, that you will get your mortgage.
- How quickly can my loan go through? Again, if the seller
knows you can close quickly, this may sway the negotiations in your
- Do you carry Adjustable Rate Mortgages? The lower the
rate (Adjustable Rate Mortgages have initial rates lower than fixed
mortgages) the more you can qualify for. While you may not opt for
this mortgage in the end, knowing it is available is like putting an
extra 'line of credit' into your pocket.
- Do you have Convertible Loans, or loans with a conversion
option? If you do find the need to use the Adjustable Rate
Mortgage, can you change it to a fixed rate in the future? At what
- Do you carry fixed-rate mortgages with 30-yr. terms? With 15
yr. terms? This is “vanilla” in the mortgage world. However,
comparison shopping of items like interest rates, application fees,
points, and other lender closing costs can yield you substantial
- Are you an FHA DIRECT lender? If this is an option (and
many first-time buyers go FHA), then this is a good question to ask.
Sometimes the processing time can really be shortened with a direct
lender. Again, this is a good negotiating tool, since it may get you
to the closing sooner.
- Are you a VA DIRECT lender? For those who qualify, a VA
loan can be a wonderful option. Again, dealing with someone who is a
Direct Lender for this type of loan can really streamline the
approval process, and help you with the seller.
- Do your mortgages carry a pre-payment penalty?
Pre-payment penalties, which had all but disappeared from the
industry, have recently reared their ugly heads again! ASK! And make
certain you fully understand the circumstances under which you may
trigger that penalty.
- Are you a portfolio lender? Some lenders keep the loans
they make “in-house”, and some sell the loans to other institutions.
While it does not impact you (or the terms and conditions of your
loan) if it is sold, there is a good reason for asking this
question. Portfolio lenders often have more leeway during the
approval process, and can tolerate past credit problems that others
may not want.
- Are your fees negotiable? Let the lender know you are
comparison-shopping. Politely asked, this question will appear to be
just one more factor in your decision-making process. If the lender
really wants your business, you may be surprised by the answer! In
any case, if you don't ask, you can be certain that no one is going
to just offer to drop his or her fees.
Taking a few minutes to ask these questions of a number of lenders
can pay off big time. These benefits may come in the form of a more
favorable negotiating position for you with the seller, and/or as a
direct saving in relation to your loan. In either case, doing your
groundwork with lenders is a smart and important way to begin your
home buying process.