The Mortgage Porter

Yesterday I was interviewed by Melinda Fulmer for a MSN Real Estate article.   Here were a few of my pointers (with some clarification) for buyers:

1.  Plan on having a down payment.  FHA allows for a reduced down payment which can be gifted or loaned by family members, as does USDA and VA. However I do like to see those shy on savings practice making mortgage payments to a savings account until they have at least 6 months of mortgage payments “in reserves”.   This account is not to be used for your down payment–it’s in case of an emergency.

2. Be picky when selecting your loan originator.  I do believe in getting referrals from people you financially respect.  You can also try “googling” their names to learn more about the loan originator and their qualifications.

Borrowers may be better off working with loan originators who have are able to provide FHA loans–even if they’re not considering FHA financing.  Many conventional loans are having to switch to FHA financing as the underwriting is more forgiving and rates may be better depending on mid-credit scores.

3. Get prequalified as soon as possible.  This is a good way to get to select your loan originator (this is not the same as a preapproval).  During this stage, you’ll be able to see how detailed oriented the LO is what their personality is like–what type of programs do they recommend.  A LO should provide you a Good Faith Estimate without any commitment from you.

4. Rate lock strategy.  Ask your LO what they can do if rates improve after you lock.  Right now, with the turbulent markets, many lenders are offering free rate float downs as long as the lock meets specific criteria.  This provides borrowers with the assurance that the rate will not be higher than the current rate lock and that should rates improve, they may have the opportunity to “float down” to that rate.  Do make sure to obtain a written lock confirmation.

For sellers, I suggest that they insist on a preapproval letter to be included with their offer.  They should also carefully read the letter, it should address the buyer’s credit, income/employment and where the down payment is coming from along with the type of loan they’re approved for. Preapproval letters are sadly not worth more than the paper they’re written on, however they can provide you with some clues about the lender the buyer is working with.  If a seller has two identical offers, the buyer’s lender can make a huge difference in whether or not the transaction closes smoothly.