Shop Around Until Interest Rates Drop when Buying a Home

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A special thanks to Alana Hallaert from First Mortgage Company for helping me out on this video. Give her a call with questions at 402-431-4316 or shoot her an email at ahallaert@firstmortgageco.com.

When you're in the market for a home, I'm here to help you find the best mortgage terms around. But I also want you to be a fully-informed consumer! 

As you already know, buying a home may be the largest purchase of your life so you should go into it with eyes wide open! In this article, I'd like to provide you some proven and common-sense guidelines that can save you time, money and hassle during the mortgage-hunting process. 

Guideline 1: Look Beneath the Surface of the Interest Rate! 

If you're like most prospective home buyers, you call lenders or use the Internet to shop for the best interest rates. That's a good first step, no doubt about it! But, the mistake many buyers make is that they stop there and don't consider the fees that may be added on to the loan later by the cheapest lender. 

In other words, it's the lenders' game, and they may want you to play by the rules you're not even aware of. The answer, of course, is to know those rules ahead of time so you know exactly what you're getting when you buy that mortgage. More on this subject later! 


Guideline 2: Chose the Type of Lender That Works Best for You! 

There are several different sources of lenders - banks, credit unions, mortgage brokers, etc. They all have their advantages and disadvantages in terms of the rates and services they can offer you. For example, credit unions often provide the best value and service, but, of course, you have to belong to one in order to receive their services. 

Regular banks and "big lenders" (Bank of America, Citigroup, etc.) also provide competitive rates and services. Of course, they only offer products their companies provide. You can also use a mortgage broker. This person is a "wholesaler" who uses several lenders to give service to their customers. The advantage of a broker is that he or she offers a greater selection of rates and products. However, they also tend to be more expensive than regular banks and big lenders. 

Brokers make money in two ways. One is origination fees ("yield spread" or "rebate"). Essentially, the origination fee is a commission paid by the bank to the brokers to encourage them to use their firm. The second way is by selling a higher interest rate to you. This means there's room for you to negotiate that interest rate down! 

When a broker quotes you an interest rate, ask him or her to tell you what the origination fee, rebate or yield spread on that rate is. For a broker, a reasonable amount would be a total of 1% of the loan amount from yield spread, origination or combination of the two. Most brokers usually want to make at least 2%. 

Tip: Don't pay an origination fee unless the broker informs you that he or she isn't getting anything on the back end of the deal. 

The bottom line: you can (and should) shop among all these lenders to find the lowest rate. It can save you thousands of dollars over the life of the mortgage. 


Guideline 3: Review the Good Faith Estimate with an Eagle Eye! 

By law, lenders are required to provide you with a Good Faith Estimate or GFE. In essence, the GFE gives you a general summary of all the costs and expenses you'll incur at the time you close on your new home. The document should cover closing costs and the amount of cash you need to close on the agreement. It should also spell out which if any prepaid expenses must be handled and the average monthly payment you'll have to make in order to keep up with the loan. 

Most lenders provide complete and straight-forward information on these forms; however, there's no reason for you to accept the GFE at face value. Comb through the information and if you don't understand a particular item or fee, ask for an explanation. If you still don't understand them, you may want a lawyer to review them for you so you have complete understanding. 

Remember: A GFE is only an estimate. Changes may occur through no fault of the lender. A reputable lender will let you know if fees are going up substantially. In general, however, if those fees go up by more than approximately 16%, then a red flag should go up in your mind. 

Guideline 4: Negotiate, Negotiate, Negotiate! 

When confronted with the expertise and "prestige" of banks, we all have a tendency to think they know best, and we should, therefore, agree to their terms. Never think this way! Banks are like any business; you can and should negotiate with them! 

Want more information on banks and other lenders? Contact me today!

5 Great Ways to Search Local Real Estate in Your Neighborhood

The thrill of buying a new home has no comparison and the very first thing many prospective buyers want to do is search listings and see what is out there.  But the many national home listings websites and resources do not offer the same kind of one-on-one benefit that comes from working with a professional who is familiar with your locale and most likely a member of the same community.  Here are five great ways to search real estate in your local neighborhood or those where you will be moving, so that you can get the best home possible in the most perfect neighborhood.

Subscribe to Neighborhood Real Estate Reports

Better Realtors take the time to prepare detailed reports that outline relevant factors to deciding on a neighborhood or community.  These reports usually contain information about properties sold, pending and active as well as any price changes on existing listings.  Reports put together by agents who are long familiar with the area have far more meaning and relevance than the online giants that have general information.  Though online real estate resources are useful for a quick look or basic idea, the specifics come in handy when really scrutinizing a potential neighborhood. 

Search By School District

Everyone knows that a good school district usually signifies a strong community and solid neighborhood.  So, regardless of whether you have school age children or not, searching properties by school district will indeed provide a far better insight to the area.  Important aspects of the community will also be readily available when measured against the school district, such as the number of registered sex offenders in the area, or area crime rate.

Map Searches Provide Ample Perspective

If you are searching on an online resource for home and property listings, one excellent tool that can easily be overlooked is the map search tool.  Performing a search in this way provides a good overall perspective on the area, the region and beyond.  Many sites quantify certain details based on your parameters, allowing you to customize your search in a visual way.  The map also moves so you can venture out into other areas and compare the neighborhoods you are considering with others in the same vicinity.

Word of Mouth – An Often Underestimated Tool

Nothing beats knowing area residents and hearing first hand of their experiences of living in the area.  What you may not be able to access online or through an agent who many not be entirely familiar with a particular vicinity, you will be able to learn through the people who live and work there.  Here again, school district is an important factor to consider.  If you know teachers and professionals who live, work and operate in the neighborhoods you are considering, chances are they know of new properties that have just gone up or they can share valuable insight on the properties you may be considering. 

Look At Things From All Vantage Points

When perusing listings, these days it is hardly possible not to utilize online resources.  Lately, there is a plethora of technologically advanced vantage points for the potential homebuyer to avail, such as viewing a video tour of the property, surrounding homes and the street directly in front.  A lot of websites also feature web views that show a bird’s eye perspective of the home, as well as what one who might be standing in the home would see if looking outside the windows.  These tools are especially useful in helping you determine the look and feel of a home you may be considering.  They are also beneficial for out of town buyers or those who want to shortlist the homes and then go looking at the ones that made the cut.

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All in all, if you focus on the local markets you will yield better results in your search for the perfect home.  When it comes down to it, resources and tools are there for the taking and if you use what is available to the fullest, you – the homebuyer or homeowner – will end up benefiting most.