Finding a Mortgage

Okay, I’ve previously asked for your help in finding a realtor. We still haven’t settled on who we’re going to work with, but we’re close (more on that soon). Now we’re looking for a mortgage. When we bought our current house, the builder guaranteed that they would match the best terms that we could come up with on the open market, and they also offered a number of incentives. Thus, we ended up financing through them. We then refinanced about about a year later when rates plummeted. When we did the refi, we worked with a discount mortgage broker that we found through In short, we had a good experience, and we got a good deal. I intend to go back to that same broker to see what they can offer this time around, but I’m also interested in hearing any and all suggestions as to how we should go about tracking down the best mortgage deal in the land. With that said, I’m just going to throw this open for discussion…

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14 Responses to “Finding a Mortgage”

  1. Anonymous

    I agree with the tried and true advice that shopping around will always get you the best deal. Better yet, do your shopping among several lenders that are shopping around themselves — in other words, mortgage brokers that deal with the wholesale lending divisions of major banks and can provide their products at better rate/fee than the banks themselves.

    Having said that, I disagree with the approach where you tell one lender what another is quoting — in other words what has to come out of this competitor’s mouth to stay in your consideration — and then hope you’re getting honest information. I think it’s always better to ask for a lender’s absolute best rate and fee combination up front, with no games. Any lender that talks about “beating” or “matching” competitors’ quotes rather than what he/she can do — because it has nothing to do with what anyone else can do — that person is someone to steer clear of.

    And I would also take issue with the idea that a Good Faith Estimate is enough. Again, that can be putting a little bit too much faith in a loan officer’s honorable interntions. Basically, a Good Faith Estimate is always subject to change, for a variety of reasons you would have trouble verifying yourself. It’s a good thing to receive as a first step, when you’re gathering quotes, but if you’re serious about pinning down the lender who claims to offer the best rate and fee package on a loan program of your choise, make sure you have a pre-approval/pre-qualification based on income, asset and credit information. That way it is less likely you’ll hear down the road you were not approved for the financing you were supposed to get.

    Then, once you are ready to go into contract to buy a specific home, you can get an actual rate lock. At that point, a good lender should be willing to give you a couple of invaluable items, IF you insist:

    1) A computer-generated lock confirmation from the actual bank that you’ll be making your payment to — it should show the name of the loan program, the number of days your rate is reserved for, and the interest rate. A broker always receives this if a lock has actually been placed and he/she didn’t just give you a lowball quote hoping to lock an undeliverable rate at a later point.

    2) A lender fee guarantee. This should be on company letterhead, signed by your loan officer, and state clearly and simply that ALL lender fees including points or origination fees (in other words, the total cost of doing business with that lender, though not title, escrow or appraisal fees) will under no circumstances exceed $X,XXX.xx amount.

    A bonus you should expect when working with a good broker is a “rate float down.” Even after your rate is locked, up until about the last week or two when the process needs to get wrapped up , you are eligible for a lower rate than the one you locked in, if the mortgage market has improved during that time. It’s rare in the current market, but mortgage rates fluctuate on a daily basis, and a couple of good down days can be enough to get the minimal 0.125% improvement on your interest rate that can add up to thousands in savings over the time your in the loan.

    Once you have those two confirmations in writing that I mentioned, you’re off to a good start, and have a basis for working exclusively with one company. What you want to see happen as soon as possible if for the appraisal report and preliminary title report to be done, and for that documentation, along with anything you might still need to provide, to be reviewed by the actual mortgage underwriters who will make the final decision to approve or decline your loan.

    Get a copy of the “conditional loan approval” on an underwriters form ASAP. If they aren’t asking for anything that will be difficult for you or another party to the transaction to produce, and if they haven’t made any “counters” that would change the loan amount, loan program, interest rate, etc. then you should be in good shape.

    The proof’s in the pudding, and that’s when you sign your final loan documents in escrow (or with a notary). Be sure there are no prepayment penalties you did not expect, and that the true interest rate (not a rate used to determine a minimum payment, such as you’d have on a loan with Negative Amortization) is correct. Focus on your copy of the “HUD-1” Settlement Statement escrow gives you to make sure the lender fees are what you expected.

    A home is normally the biggest purchase you could make. If you shop around for anything, shop around ten times as hard for your home loan. The payoff can be huge.

  2. Meg: I’m glad that it worked out for you, but people need to be very careful when it comes to hitting their credit cards hard before closing. Mortgage lenders always pull one final credit report just before giving the go ahead for closing, and it’s possible to screw yourself over at the very last minute.

  3. Anonymous

    Negotiate. Negotiate. I called about 4 places and got written good faith estimates from everyone. I then asked brokers if they could beat costs, rates, and points. I ended up with a sweet deal, surprisingly it was a national bank – Wells Fargo – that came in with the best rate and lowest cost. I was also approved for a no docs mortgage (ie. did not have to produce any W-2s, financial records, or tax returns). After I locked, only then did I did I start applying for 0% BT to come with another 30K.

  4. Nickel

    Thanks for the tip on PenFed… I just ran across that same thread yesterday afternoon, and they definitely do look attractive. We’re already members (got in by joinging the NMFA for a year for $20) so it wouldn’t be a problem to use them. And there are no bank or lender’s fees, just the third party stuff that (appraisal, title insurances, etc.) so closing costs would be dirt cheap.

  5. Anonymous

    this is an old FW thread, but some of the closing costs they wave (and the possibility of buying points beyond what is shown on the website) might interest you:

    FWIW, I know next to nothing about mortgages. . . and only pass this info. on because the OP seemed to do an excellent job documenting his experience with the Pentagon Federal Credit Union.

    Oh, and if you didn’t know already (which I doubt), you can join penfed by signing up for some national military family association (for like $20).

  6. Anonymous


    I really like David Porter’s comment.

    In my early real estate years I couldn’t afford a full 20% down and had to pay PMI until my real estate appreciated.

    For the next much more expensive property I spent alot of time talking with various mortgage professionals and brokers. I ended up settling with the one who was most creative in envisioning the right kind of mortgage for me — there are so many choices.

    I still try to put as little down as possible while interest rates are still low (historically).

    To avoid PMI, I usually get a 80% first mortgage and a 15% second. These days 30 year fixed is not much more expensive than 7/1 or even 5/1. As for the second, there seems to be alot more fixed rate second mortgage product available than there was before. Traditionally the second mortgage would be a floating rate HELOC – something I’d avoid right now.

    Now if I could get a fixed rate heloc at a cheap rate, I’d flip.

    Another thing I found in my last mortgage search was that out of state (out of region banks) can often provide mortgages in other areas. Our of staters may often be more competitive than instate providers, especially in the second mortgage market (if that’s what might interest you).

    Also, here’s an off-topic tip. I always try to take title of my property in tenancy by entirety with my wife – many states allow it. It provides a significant level of creditor protection if you should get yourself into a pickle.

    Keep up the great blogging.

    Good luck and have a great Tuesday,
    Making Our Way

  7. Nickel

    Thanks for your thoughts everyone. That Searchlight Crusade link was great. I could spend an entire day (at least) there. David, thanks for your insight. That’s an interesting way to turn the question around.

  8. Anonymous


    I would suggest that you are asking the wrong question. Looking for the “best mortgage” is going to land you with the 90% of the people in the mortgage business that are essentially selling mortgage loans and creating commodities of themselves.

    There are a few that would walk you through the right questions. For example, “What is the BEST WAY to finance your new home purchase?”

    You are an intelligent man but you have not closed many mortgages in your life. I would recommend that you look for someone who can give you good advice.

    In my 20 years and over 7,000 mortgage closings I have been able to easily leave my competitors empty handed because I first sought to answer the big questions.

    The best way may be an idea that you didn’t even know exists!

    Look for a professional mortgage planner first, determine the proper approach, and THEN find your mortgage.

    H&R block will do tax returns, but a GREAT CPA is worth his/her weight in gold over the years.

    The same thing holds true for a good mortgage planner.

  9. Anonymous

    On the FatWallet Finance Forums, there is much talk about NetBank. You may want to at least give them a look. You may want to check the FatWallet forums as well, as many are listing the current incentives that are offered.

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