The First Thing to Do is Locate a Good Loan

Every potential home buyer has the option of shopping around for the best mortgage loan terms they can obtain.  Generally, a mortgage acceptance requires 25-40 days for conventional, 30-60 days for VA and FHA from application to approval. In some cases, loans may be approved more quickly.  At DMS Properties, LLC Residential Real Estate Services, we have no “affiliated vendors” to provide mortgage services.  We leave that decision up to our clients, although we do have several other lenders that we think very highly of that we can recommend to you.   You can find them listed in our Business Directory. Here are some things to keep in mind:

Shop Smart For Mortgage Money

It used to be that qualified home buyers simply went to their nearest bank or savings and loan for the standard, fixed-rate, 30-year mortgage or the VA/FHA backed loan.  Interest rates were not highly competitive — back then.  Now, of course, things have changed.  Competition among lenders is lively, and smart borrowers shop carefully to find the financing that best suits their circumstances and needs.

We work with several loan officers that we trust to do the job the way we believe it should be done for our customers and clients.  There are also some that we would NOT recommend that you work with for your financing.  We can help you get the process started. You can pick any financial institution that you feel comfortable with, though.

Here’s where to shop:

• Mortgage Lenders — Mortgage lenders issue mortgages to borrowers.  They then process and sell the mortgages to large investors or into the secondary mortgage market.

• Mortgage Loan Brokers — Some individuals or groups charge a fee (usually to the borrower) to match borrowers with lenders.  Sometimes they make direct loans.  An advantage of working with mortgage brokers is that they often represent many investors and can provide you with many more financing alternatives, usually at the same price as the mortgage banker.

• Financial Institutions — Mutual savings banks, savings and loan associations, insurance companies, and some commercial banks are the traditional sources of mortgage loans. Savings and Loans often grant favorable terms to their own account holder.

• Private Lenders — Individuals (often home sellers) and groups (sometimes sellers’ employers, if the seller is being transferred) lend money.  This source is especially helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds, and other mortgage plans.

• Credit Unions — Federal credit unions can write 30-year conventional and government insured mortgages.  Some will make loans; others may not.  This may be a good source for credit union members.

• Finance Companies — To compete with the more traditional lenders, some finance companies promise quick service and some do not charge mortgage “points” or “pre-payment penalties”.

Ten Questions Most Lenders Will Ask You

Here’s the information most lenders will need:

• The amount of money you wish to borrow and the length of time you will need the money.

• Your current address and any other addresses covering the previous 24 months.

• Your social security number.

• Your current employer’s name, address and phone number and the same information for any other employers in the previous 24 months.

• Your gross monthly income including documentation: most recent pay stub, final pay stub for any job you may have left in the current year and previous year’s W-2 form(s).

• Complete account statements (all pages) for any bank, credit union, retirement, or brokerage accounts.

• Your assets (real estate, personal property, stocks and bonds, life insurance with cash value, etc.).

• A complete list of your debts including account numbers, balances and minimum payments.

• A copy of the sales contract.

• An account, in writing, of any problems concerning your application and any documentation of the circumstances of those problems.

With this information in hand, here are the steps the lender will take to process your application:

1. Verify the facts.
2. Get a credit report.
3. Make a property appraisal.
4. Review your application.
5. Decide whether or not to make the loan.

There are Questions You
Should Ask Most Lenders

Here’s how to shop; a few of the questions to ask a lender:

• Are both fixed-rate and adjustable mortgage loans available?

• What is the interest rate?

• What are the “points”?

• How long can I “lock-in” the financing at the current interest rate?

• What are the other fees a lender may charge me in conjunction with my loan?

• Are funds for a second mortgage available?

• On adjustable loans:
  • How often will the interest rate be adjusted?
  • Is there a maximum limit on each rate change?
  • How often will the monthly payment be adjusted?
  • Is there a ceiling on payment adjustments?
  • Can the term of the loan be extended?

• Is there a pre-payment penalty clause?  This involves extra charges for paying off the loan before maturity.  About 80 percent of all loans in the United States are paid off early.

• Is there an open-end clause?  This clause in a mortgage allows you to borrow in the future for home improvements or other purposes, up to the amount of principal you’ve paid off. 

• What is the “grace” period? How late can a monthly payment be made before a late charge is assessed?  What will happen if a payment is missed? 

• If you sell your house, will the new buyer be able to assume your mortgage at the same interest rate?

• Do you have to pay “points” to get your new mortgage?  Usually lenders charge points for the cost of giving you a mortgage loan.  A “point” is 1% of the loan. 

• Will the lender require mortgage insurance?

The Impact of Interest Rates

It is important to keep the tax advantages in mind when considering whether to rent or buy.  A mortgage payment of $1,500 could result in a lower overall cost than an $1,200 rent amount after you consider tax advantages.  Remember a buyer may not realize this “tax break” until tax time comes around unless withholding taxes are decreased in anticipation of increased interest payment deductions.  Please contact your tax adviser for more information.

Our Home Buying Guide — The Starting Point

How Much House Can You Afford? — The Financing is What Matters

What To Look For — Searching the Available Homes

Negotiating the Purchase — You Need an Expert to Negotiate on Your Behalf

Locating the Right Loan — Different Financing for Different People

Protecting Your Investment — Inspections, Appraisals and Insurance

The Big Day! — Finalizing Your Purchase at Settlement

There are many sources for finding homes that are available to buy.  One of them is right here with our help, using the resources of the Multiple Listing Service (MLS).  The second is to look into new home developments that are offered directly to consumers by builders and developers.  The third is to investigate homes that are For Sale By Owner (FSBOs).  Our licensed real estate agents can help you with any of these options, although the strategy will be a little bit different for each.