When buying your home, whether it be your first or your fifth, you will likely be taking out a mortgage to finance your purchase. The lender you choose plays a key role in the process of helping you get into the right home- choosing the right one can mean the difference in your transaction going oh-so-easy and you not getting into that home at all. It’s that important.
To get in with the right mortgage guy or gal, first ask your realtor for some recommendations. They work with mortgage brokers every day and they know who can close the deals quickly and easily. Then, ask the questions below and interview a few mortgage brokers before you decide who will be the best fit for you.
1. Are you local to the area? How familiar are you and your appraisers with the neighborhood I am looking to buy in?
Ok, so here is the skinny. Most of us use big banks for our every day banking, checking, and savings but when it comes to getting a home loan, going local is really important. Local lenders, banks, and credit unions usually have more competitive rates that the big guys. They also have a whole lot less red tape- they can be more flexible with their guidelines because they can have a more personal relationship with their clients. You won’t just be a number in the crowd.
The local aspect is also really important when it comes to the appraisal process. During the appraisal, the lender will send out an appraiser to assess the value of the property. Real estate values are hyper-local so having someone local is really important- especially in a place like Boulder. If you have a nationwide lender, they may send an appraiser from Denver, Fort Collins, or Colorado Springs to appraise your Boulder home which would lead to an appraisal that is too low. This, in turn, can cause real headaches during the transaction and can sometimes even cause the deal to fall through.
2. Can I have a list of all the fees I will be charged when completing my home purchase?
Usually when people are considering getting a home, they look at how much of a mortgage they can afford on a monthly basis. This is really important but don’t forget there are other one-time fees that come into play when closing on a home. Besides your monthly PITI (Principle, Interest, Taxes, and Insurance) mortgage payment, as a buyer you will also have the following one-time fees:
-Home Inspection: $300-400
-Home Appraisal: $300-400 paid at the time of closing and wrapped into the loan.
-Closing Costs: Typically around 2% of the purchase price. This is an estimate but includes things like documentary fees, title insurance, escrows for property taxes and insurance. Remember this number increases if you are paying points down on your loan. Also, these costs can come into play when negotiating the contract and the seller can help pay them (although in our current market, this is unlikely since sellers are many times receiving multiple offers on their homes).
-Loan Origination Fees: 1% of the amount of the loan. This is the fee the lender charges to underwrite and process the loan. This is how they make their money.
3. What are your specific rules and regulations regarding condos?
Depending on the lender and the kind of loan you will take out, there will be some rules regarding which condos you can buy. The most important rule has to do with the owner occupancy level. If you plan to take out an FHA loan, then at least 50 percent of the units in any condo complex need to be owner occupied. If the percentage of owner occupants is less than this, you will have to put 20 percent down on your loan and take out a conventional loan. Sometimes local lenders can be more flexible than this. If you plan on purchasing a condo, ask what different programs they have that might work for you.
4. How much of an HOA can I afford? How does that affect how much I can spend?
In a place like Boulder, don’t forget about the HOA’s. These monthly fees make a big difference in what purchase price you can afford. Your lender can tell you exactly how much of monthly payment you can make. They will let you know exactly how much you can afford to pay and exactly how much HOA you can afford too.
5. How do your mortgage rates compare with others in the area?
Even small differences in percentage points matter over a 30 year time period. Make sure your potential lender is competitive and knows their numbers so you can shop around and make an informed decision.
Last but not least, make sure you like your lender. You will be working closely with them and they have a big stake in how smoothly your transaction goes. If you get along swimmingly, you may just start great business relationship that will benefit you for years to come.
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By Allison Benham & Ken Crifasi