Your Buyer’s Guide to Inventory, Value & a Great Experience.

Finance

Financing is one of the most important decisions that a home buyer will make.  Lender selection is just as important as the loan program you select.  I advise my clients to shop around; however, take some initial critical steps prior to speaking to a Loan Officer.
1st.  Obtain copies and review your credit reports.  Know your credit scores and address any derogatory items listed on your credit report.  Pulling your own credit report will NOT affect your score – it’s referred to as a “Soft Pull”.
2nd.  Examine your checking account for any “NSF” items.   
3rd.  When you finally contact a lender -  verify their truthfulness by asking about your credit scores.  Typically, lenders look at the middle score as a pricing guide.

Many lending institutions advertise low interest rates just to make their phone ring.  Among loan officers these rate quotes are referred to as “Fish Rates”.  Mortgage loan officers generally make their money in several ways:

  • Origination Fee – Typically 1% of the loan amount.
  • Yield-Spread – The difference between your actual interest rate and the rate at which the Lending Institution secures funds.
  • Processing Fees – Underwriting Fees and general overhead cost the lending institution passes on to the borrower.


Downpayment is also a major consideration when selecting a particular loan program.  In a recent survey of mortgage lenders, 69% of all buyers believed they would need a much higher down payment than what was actually required.  As a general rule, if your down payment is less than 20% of the purchase price you will be required to pay Mortgage Insurance.  There are 2 components to Mortgage Insurance – a premium paid at closing and a monthly expense built into your mortgage payment.

Your MonthlyPayment generally consists of PITI.  An acronym for Principal, Interest, Taxes and Insurance.  If your down payment is less than 20% of the purchase price, you will have MI or monthly Mortgage Insurance added into your monthly mortgage payment.  One of the best websites that has a variety of mortgage calculators is www.bankrate.com. However, it does not consider mortgage insurance.

SpecialNote – if you are buying a New Builder Home, be very careful about your property taxes and escrows.  In Texas, property taxes are deferred and are not calculated until December 1st of each year.  Typically, if you close a New Builder home prior to December 1st, the taxes estimated in your monthly home payment are based on “dirt value” regardless of improvement value.  Consequently, you may be “short” on your escrow and your new monthly mortgage payment will be substantially higher. 


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