Is the grass always greener on the other side? It seems to happen more often lately that buyers go into escrow and within a week decide to change lenders. They switch based on points or interest rate. Some can't figure out whether paying points to get a lower interest rate is better than paying no points to get a slightly higher rate. They enter mortgage lending hell.
I try to explain that it's better to choose a mortgage broker or a banker based on honesty, performance and long-term relationship expectations, but that advice sometimes falls on deaf ears. It's human nature to want to get the lowest price possible, and that's how many first-time home buyers shop for a mortgage.
Here are a few things to consider when looking for a mortgage.
Good Faith Estimates mean nothing because lenders are not bound to honor them. This means a mortgage broker can quote a very low interest rate but is not required to deliver that interest rate at loan lock. Plus, rates fluctuate daily and sometimes hourly. Some mortgage brokers, in an effort to grab the business at hand, will promise a low rate with no intention of performing. They figure once a buyer is at the closing table, the buyers will be stuck with the loan they get.
If your lender is out of area, it means the appraisal could be in jeopardy. Double ditto if it's an FHA loan because the appraisal could very well contain conditions. Plucking an appraiser from a huge pool that is mixed among appraisers who have no experience to part-time appraisers to those who are fully qualified and familiar with the neighborhoods in which they appraise, can mean disaster for the buyer's loan. Because you might get a bad appraisal or an appraisal containing unnecessary and ridiculous conditions to meet prior to funding. Many local lenders work with qualified appraisers they trust.
The choice between a loan without points and a loan with a point is another contention. Say, your loan is $300,000, and you're trying to decide between a rate of 5.5% with zero points or 5% with one point. A principal and interest payment on $300,000 at 5.5% is $1,703. At 5%, it's $1610. The difference is $93 a month.
If you're paying one point for a 5% rate, that cost is $3,000. Take the difference in the monthly payment between 5% and 5.5%, which is $93, and divide it into $3,000. The answer is 32. This means it will take 32 months to recoup the cost of the 5% rate. If you plan to stay in the home beyond three years without refinancing, you will come out ahead. Moreover, if you can get the seller to pay that point for you, you're ahead of the game at closing.
The Short Sale, by Elizabeth Weintraub, coming from publisher Archer Ellison in January 2009.
Photo: Big Stock Photo
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Certified HAFA Specialist
My Sacramento Real Estate Listings
Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.
