Mortgage Loans For First Time Buyers
What is the best way to compare loan terms between lenders?
What I like to do with my clients, is that once I've talked to the client, I'll plug in a programme I have about mortgage products. In the simplest terms, there are mortgage products that are out there that will adjust for one month, all the way up to a 30-year fixed, and what I like to do with my clients is break it down for them; let them know how a one-month adjustable works compared to a three-year fixed, a five-year fixed, a seven, a ten, and a thirty-year fixed.
How long does the loan application process take?
Usually we package the file; we collect your income, your assets and all your documentation; we order the appraisal for the property; and we obtain escrow instructions and preliminary reports. We put this whole package together to send off to your lending institution. Normally that lending institution will take about 2 to 3 days to have the full approval. So I would say to get your full loan approval, it'll take about six business days.
What documents or information will I need to provide the bank during the loan application process?
The needs list is what we call it. You will need, if you're a salaried person, your two most recent W-2s, your tax returns for the last two years (just federal), and all schedules. Sometimes people will just send me the first two pages of their tax return, but I do need all the pages. We also need your bank statements; the last three months' bank statements. We'll already have run your credit. Sometimes there'll be letters of explanation that we might need if you have some issues with your credit report.
What mistakes can I avoid when choosing a mortgage loan?
For a first time home buyer, number one is to be careful and leery of paying points. Also, you want to try and avoid pre-payment penalties. Furthermore, to get into your first home, my advice is you're not ready unless you have at least 10 percent of the down payment. So, 10 percent of the down payment, let's avoid points, let's avoid the pre-payment penalty, and last but not least, let's definitely avoid that negative amortization loan.
Are there special mortgages for first time homebuyers?
There are special mortgages for first time homebuyers. Nowadays they really only comes into play for down payment. There are a few banks out there that still give incentives; maybe on interest rates or putting less money down, or looking to make the first-time homebuyer able to qualify a little bit easier, but not as much as there used to be.
What fees are associated with the mortgage loan application process?
Regarding the basic mortgage loan application process, whether it's a purchase or refinance, you are going to have escrow fees, title fees, standard bank fees (like a processing fee), appraisal fees, and a credit report. What we do is we would break down all these fees for you in what's called the good faith estimate of closing costs. Regarding fees with points, you really only want to pay points if it's really going to help you lower your interest rate. Other than that, let's avoid the points.
Are any of the fees associated with the mortgage loan application process negotiable?
Everything is negotiable. For me, for example, it's the basic fees. I'm not here to try to tack on any junk fees. It's the processing fee. Here at Platinum Capital, it's to cover the overhead; it helps with the rent, the paper, and everything we that use on a daily basis. It helps to pay for the processors and assistants that we have. However, by all means, everything is negotiable; it just depends on the situation at hand.
What are junk fees and how can I avoid them?
You can avoid junk fees by going to a reputable mortgage broker such as myself. I'm not here just to know you for the next 3 days and try to make as much money as I can off of your loan. Rather, I am going to make my standard amount that I normally make, but you know I'm in it for the long haul as your mortgage planner. Concerning fees, I'll be able to show you when there's a junk fee that's on a good faith estimate. Like if you were talking to another institution, send me over the good faith estimate, and I'll tell you right away if there's any junk fees that are on that estimate, or if that's a solid deal.
What are points and do I have to pay them?
Points aren't as prevalent as they once were and let me give you an example of that. Today's market rate is at six percent, that's at what's called "par pricing", and if you're not happy with the rates today, and if you want to buy down that rate, you can do so by paying points. So, if I quote you six percent today it's going to be zero points. Let's say you spoke to somebody else previously and they also quoted you six percent, but they charged you a point. If you're going to be obtaining a three hundred thousand dollar mortgage, one point is one percent of that mortgage loan amount of three hundred thousand, which would be three grand. In a nutshell, those three thousand dollars that that other mortgage broker is quoting you is going into their pocket. I'll be able to break it down for you and say "Look, you want to pay points to buy down the rate; here's the difference between a six percent rate at no points and a five and a half rate at one point and we'll see if it makes financial sense for you to do so."
