Most of us would like to think so. I’ve watched that show a few times and have thought “I don’t remember learning that”. Of course, that was over 30 years ago. Wow am I old! What I do remember as a 5th grader is breaking my leg and being the first person to ride in our new elevator. Oh yeah, that was the coolest. I had a special key and everything — such privilege! Now, breaking the leg on a school event and being taken to the hospital in a bus… not so much! I was heckled quite a bit during that time. Hey, maybe that’s why I don’t remember learning certain things … I was too traumatized by the mean kids. Ha!
So seriously, why start a post with this? As a home buyer, especially those of you looking to buy for your first time, you “learn” a lot about the process, like what lender to use, what to ask when comparing loans and other wonderful tips, mostly from friends, family and co-workers. I am here to tell you that though they may seem to know the ropes, it doesn’t mean their situation matches yours. There are plenty of things you can teach them.
For instance, you may be advised to ask what rates are when narrowing down what lender you want to use. Knowing the rates is a very smart thing to do. But, realizing why this question isn’t valid is smarter. On any given day, rates can change. One lender can be higher or lower than another and change positions within the same day. There are many loan officers out there that will quote you an interest rate that “teases” you into wanting to work with them. Truth of the matter is rates don’t matter one iota unless you have a purchase agreement accepted on a home and you can lock that minute. Until that time, lenders can tell you whatever they want. Notice I am being general here. I am of the mindset that starting honest is a good thing — not only that, there is always a little fear I have, that indeed, you will call back (good thing) and I have to abide by my rate commitment (not so good if I under-quoted). And so you know, many first time buyer programs have their own rates tied to them. So regardless of what lender you use, the rate is the rate. No variance. This means even though you’re doing an FHA loan, you won’t be quoted an FHA rate, but that of the first time buyer loan program. And, this also assumes the lender you called can and is willing to do these loans. Many don’t and will give you bad information to steer you from something that may be the BEST deal for you overall.
Okay, if the rate is the same because you’re going with the first time program, then what else should you compare? You may be advised to compare closing costs by getting a good faith estimate. Again, smart idea to check costs between lenders, but this isn’t the end all for making a decision. Here’s a question … what is it worth to you to get your loan closed on time or at all for that matter? Tough to answer since you might not be at that point yet. I will say that it’s worth it’s weight in gold. Trust me on this. In the 16 years I have originated, I have had many people jump ship after I’ve spent hours educating and being there to answer their questions, just to save 1/8% in rate or $500 in closing costs. And you know what? I can honestly say that a good number of them call back complaining about one thing or another with the other lender stating they “wish they had stayed with me”. Nice compliment, but they don’t pay the bills. Compare your costs; go ahead. Just remember it’s tough to put a dollar figure on reaching your dream of home ownership.
What else are you hearing? Had anyone suggested working with a broker because they can “shop” to find you the best rate? Or maybe they’re suggesting you go with a bank, a lender that does everything in-house. All good advice. Keep in mind; you are getting this advice due to that person’s experience with THEIR process. Gosh, I can’t tell you how many people say to me during a meeting “my friend got this rate” or “my friend only needed to put xxx% down”. Yes, their friend probably had that experience. Back to it being THEIR process. On conventional financing, for example, depending on the amount down and your credit score, you could pay a higher rate than someone whose score is higher. It’s reality. Or maybe they “financed” their closing costs so you should too. Want the education here so you are smarter than the 5th grader — ie your friend, family or co-worker? Closing costs cannot be financed in the way you may think. The only way to “finance” costs is to have the seller pay them. So why would that make them financed if the seller pays them? As a good student, that is a brilliant question. Let’s say the house you want is $100,000. When you make your offer, you ask the seller to pay $3000 toward your costs; the seller agrees. What did they just agree to? Making $100.000 on their home or making $97,000? You got it, the lesser figure. Essentially, then, you could have paid $97,000 for the home, asking for nothing, and they would have agreed. Indeed, you are “financing” the costs in this respect.
Okay, off subject on the last one. It doesn’t necessarily matter what type of lender you choose. You want someone reputable, honest, knowledgeable about the first time buyer programs, as well as forthcoming with information on them; and most importantly, you want your deal to go smoothly. All lenders have their down sides. A bank just offers one product. A broker gives you options. Sometimes, this really means the broker has more opportunities to make more money on your loan (which you won’t know and really don’t care if you’re getting what you want for terms and customer service). Could you get all these things under one roof? Of course you can!! We, among a few other lenders, offer both– the security of having in-house processing and underwriting, so control of the process, along with options. And when searching your options, don’t forget to ask about the first time programs. If you really want to test their knowledge, let them know you’re a first time buyer and see if they offer programs that would suit your situation. If not, then I submit to you to take a pass on that lender. They won’t be working in your best interest.
I know there’s more to being smarter than a 5th grader and plenty more scenarios I can throw at you. Bottom line … make sure your questions are handled, options are proposed and the company has enough support to handle your loan through the process. Oh, and tell your friends, family and co-workers “thank you” for their advice and let them know you’ve got your situation handled. There are other ways to put this, but if you still want to keep them as friends … you may want to tread lightly! Oh, and one last thought. By no means am I saying to stop listening. Some advice will be good; it’s just choosing what advice to listen to. Good luck!
Kind of a silly question, right? Most people think refinancing makes sense whenever the rate is lower. I would concur, but the question is, how much lower does the rate need to be to make sense?
