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First time homebuyer, shopping for a lender
My H and I have met with a real estate agent, and their advice is to shop around for a lender to get pre approved, but choose only 1 to run your credit with. This is really confusing advice. First, I'm not even sure why I'm supposed to shop around. It seems it's more for finding someone you like working with that makes you feel comfortable with the process rather than getting you the best deal. We've talked to 1 person so far, who basically told me what kind of loans might work for us. He gave an estimate as to what the interest rate would be, but understandably, can't do more until he sees our credit.
How am I supposed to shop for the best deal when these lenders only tell me what I already know (we could do an FHA, or a 5/1 ARM, etc) ?? What am I supposed to ask these people to compare whether they offer a better deal?? Totally confused, need HELP!!!
Re: First time homebuyer, shopping for a lender
I think that's pretty crappy advice, at least based on my understanding of the process.
You can have multiple credit pulls for mortgage inquiries within a certain period of time (I want to say 15 or 30 days) without them affecting your credit score (it would count as one pull). We ended up getting pre-approved by two - Wells Fargo who we bank with and then a local mortgage broker because it made our offers more appealing. Had we known that using the local broker would make us more competitive, we would have just gone with them from the getgo. Their rates were better than WF.
If your REA is savvy, they should be able to recommend a local lender or broker that is favored by agents. We LOVED our mortgage broker and he did a killer job getting our loan through quickly and as stress-free as possible. He was available at crazy hours and got new pre-approval letters to me within an hour of my asking.
I would pick two or three lenders - your own bank and one that your REA recommends. You might want to ask anyone who has recently purchased a home in your area for suggestions as well.
You should get pre-approved by a few lenders within a short period of time - best to start the process with all on the same day as some take longer than others. Any and all credit pulls that occur within a 30 day period count as one pull. I had pulls 45 days apart (longer than recommended) and it only dropped my credit by 1 point so if you're not on a cusp I wouldn't worry about it. (ie; there can be a difference between interest rates above and below 760 but above or below 780 doesn't matter. I would talk with a local loan broker (some realtors find this attractive), a bank, and a credit union.
You are shopping not only for their interest rates but also for their fees as both make a difference; some lenders will charge you a certain number of points to get a particular intersest rate. When you work with multiple lenders you have the advantage of being able to negotiate. My preferred lender was charging 1 pt ($5k) to get a loan with a 3.75% interst rate, less preferred lender was giving 3.75% with 0ponts ($0 fee). I was able to go to my preferred lender with the other good faith estimate and they matched. 10 minutes for a pre-approval saved me $5k - I'll take it!
Good luck!
Thanks! This info is helpful! Please keep it coming. I'm totally good with everything about buying a house except the financial part... that always seems to be the part that doesnt' get talked about as much.
Also, is there a length that a pre approval is good for? Say we get pre approved today, but don't find something for a few months, is that ok?
We just got pre-approved, and we did a little research on different mortgage companies based on reviews and potential rates before we filled out our application with one company. We got pre-approved pretty quickly once they received all the needed items.
My husband asked our realtor last night if we should "shop around" and get one more pre-approval to make the process easier and maybe get us a better rate while we start looking. Our realtor told us to wait, and that we'd be fine for shopping with the one pre-approval letter since that's all we really need to make the initial offer. Once we got an accepted offer he told us that would be a better time to "shop around" if needed since we would have a better idea of our loan amount and interest rate. Also, he said it's best not to have too much people digging in your financials if it's not needed. So we're going to wait until we have a better idea of "the house" since it could be 3 weeks or 3 months.
I think the length of the pre-approval depends on your mortgage company and if anything changes-- like if you switch jobs during your search, you may have to give additional info in order to keep the pre-approval in tact. On our previous house search, it took us a few months to use our letter on a short sale. After the offer fell through, we actually had to reapply for another pre approval to place on another house, but I think it depends on the bank. It should be okay if it takes you a few months to find something, but I would just ask your lender just in case.
They are typically good for 90 days. If it takes you longer than that they will have to pull your credit again.